MANUAL OF REGULATIONS FOR NON-BANK FINANCIAL INSTITUTIONS
S REGULATIONS
(Regulations Governing Non-Stock Savings and Loan Associations)
TABLE OF CONTENTS
PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. SCOPE OF AUTHORITY
SECTION
4101S
Scope of Authority of Non-Stock Savings and Loan Associations
4101S.1
Membership
4101S.2
Organizational requirements
SECTIONS
4102S - 4105S (Reserved)
B. CAPITALIZATION
SECTION
4106S
Capital of NSSLAs
4106S.1
Regulatory treatment of capital contributions
of members
4106S.2 - 4106S.6 (Reserved)
4106S.7
SECTIONS
Revaluation surplus
4107S - 4110S (Reserved)
C. (RESERVED)
SECTIONS
4111S - 4115S (Reserved)
D. CAPITAL-TO-RISK ASSETS RATIO
SECTION
4116S
Capital-to-Risk Assets Ratio
SECTION
4117S
Withdrawable Share Reserve
SECTION
4118S
Surplus Reserve for Ledger Discrepancies
ix
SECTION
4119S
Reserve for Office Premises, Furniture, Fixtures and Equipment
SECTION
4120S
(Reserved)
E. (RESERVED)
SECTIONS
4121S - 4125S (Reserved)
F. NET INCOME DISTRIBUTION
SECTION
4126S
Limitations on Distribution of Net Income
4126S.1
Reporting and verification
4126S.2
Recording of net income for distribution
SECTIONS
4127S - 4140S (Reserved)
G. TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS
SECTION
4141S
Definition;
Trustees
4141S.1
4141S.2
4141S.3
4141S.4
4141S.5
Qualifications; Responsibilities and Duties of
Definition of trustees
Qualifications of trustees
Powers/responsibilities and duties of trustees
General responsibility of the board of trustees
Duties and responsibilities
SECTION
4142S
Definition and Qualifications of Officers
4142S.1
Definition of officers
4142S.2
Qualifications of officers
4142S.3
Duties and responsibilities of officers
SECTION
4143S
Disqualification of Trustees and Officers
4143S.1
Persons disqualified to become trustees
4143S.2
Persons disqualified to become officers
4143S.3
Disqualification procedures
4143S.4
Effect of non-possession of qualifications or
possession of disqualifications
4143S.5
(Reserved)
4143S.6
Watchlisting
SECTION
4144S
Compensation of Trustees, Officers and Employees
4144S.1
Compensation increases
4144S.2
Liability for loans contrary to law
x
SECTION
4145S
Bonding of Officers and Employees
SECTION
4146S
Agents and Representatives
SECTION
4147S
Bio-data of Trustees and Officers
SECTION
4148S
Full-Time Manager for NSSLAs
SECTIONS
4149S - 4150S (Reserved)
H. BRANCHES AND OTHER OFFICES
SECTION
4151S
Establishment of Branches/Extension Offices
4151S.1
Application
4151S.2
Conditions precluding acceptance/processing of
application
4151S.3
Internal control system
4151S.4
Permit to operate
SECTIONS
4152S - 4155S (Reserved)
I. BUSINESS DAYS AND HOURS
SECTION
4156S
Business Days and Hours
SECTIONS
4157S - 4160S (Reserved)
J. REPORTS
SECTION
SECTION
SECTION
4161S
4162S
4163S
Records
4161S.1
4161S.2
Reports
4162S.1
4162S.2
4162S.3
Uniform System of Accounts
Philippine Financial Reporting Standards/
Philippine Accounting Standards
Categories and signatories of reports
Manner of filing
Sanctions and procedures for filing and payment
of fines
(Reserved)
xi
SECTION
4164S
Internal Audit Function
4164S.1
Status
4164S.2
Scope
4164S.3
Qualification standards of the internal auditor
4164S.4
Code of Ethics and Internal Auditing Standards
SECTIONS
4165S - 4170S (Reserved)
K. INTERNAL CONTROL
SECTION
4171S
External Auditor
SECTION
4172S
Financial Audit
4172S.1
Audited financial statements of NSSLAs
4172S.2
Posting of audited financial statements
SECTION
4173S
(Reserved)
SECTION
4174S
Risk Management Function
SECTIONS
4175S - 4179S
SECTION
4180S
(Reserved)
Selection, Appointment, Reporting Requirements and Delisting
of External Auditors and/or Auditing Firm; Sanction
L. MISCELLANEOUS PROVISIONS
SECTION
4181S
Publication Requirements
SECTION
4182S
Business Name
SECTION
4183S
Prohibitions
SECTIONS
4184S - 4189S (Reserved)
SECTION
4190S
Guidelines on Outsourcing
SECTIONS
4191S
(Reserved)
SECTION
4192S
Prompt Corrective Action Framework
xii
SECTION
4193S
Supervision by Risks
SECTION
4194S
Market Risk Management
SECTION
4195S
Liquidity Risk Management
SECTION
4196S
Information Technology Risk Management (ITRM)
4196S.1 Declaration of policy
4196S.2 Purpose and scope
4196S.3 Complexity of IT risk profile
4196S.4 IT rating system
4196S.5 Definition of terms
4196S.6 Description of IT-related risks
4196S.7 IT Risk Management System (ITRMS)
4196S.8 Reports
4196S.9 Sanctions and penalties
SECTIONS
4197S - 4198S (Reserved)
SECTION
4199S
General Provision on Sanctions
PART TWO - DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS
SECTION
4201S
Checking Accounts
SECTIONS
4202S - 4205S (Reserved)
B. SAVINGS DEPOSITS
SECTION
4206S
Definition
SECTION
4207S
Minimum Deposit
SECTION
4208S
Withdrawals
SECTION
4209S
Dormant Savings Deposits
SECTIONS
4210S - 4215S (Reserved)
xiii
C. (RESERVED)
SECTIONS
4216S - 4220S (Reserved)
D. TIME DEPOSITS
SECTION
4221S
(Reserved)
SECTION
4222S
Minimum Term and Size of Time Deposits
SECTION
4223S
Withdrawals of Time Deposits
SECTIONS
4224S - 4230S (Reserved)
E. - F. (RESERVED)
SECTIONS
4231S - 4240S (Reserved)
G. INTEREST ON DEPOSITS
SECTION
4241S
Interest on Savings Deposits
SECTION
4242S
Interest on Time Deposits
4242S.1
Time of payment
4242S.2
Treatment of matured time deposits
SECTIONS
4243S - 4250S (Reserved)
H. (RESERVED)
SECTIONS
4251S - 4260S (Reserved)
I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS
SECTION
4261S
Opening and Operation of Deposit Accounts
4261S.1
Who may open deposit accounts
4261S.2
Identification of member-depositors
4261S.3
Number of deposit accounts
4261S.4
Signature card
4261S.5
Passbook and certificate of time deposit
4261S.6
Deposits in checks and other cash items
SECTIONS
4262S - 4280S (Reserved)
xiv
J. (RESERVED)
SECTIONS
4281S - 4285S (Reserved)
K. OTHER BORROWINGS
SECTION
4286S
Borrowings
SECTIONS
4287S - 4298S (Reserved)
SECTION
4299S
General Provision on Sanctions
PART THREE - LOANS AND INVESTMENTS
A. LOANS IN GENERAL
SECTION
4301S
Lending Policies
4301S.1
Authority; loan limits; maturity of loans
SECTION
4302S
Basic Requirements in Granting Loans
SECTION
4303S
Loan Proceeds
SECTION
4304S
Loan Repayment
SECTION
4305S
Interest and Other Charges
4305S.1 - 4305S.2
(Reserved)
4305S.3
Interest in the absence of stipulation
4305S.4
Escalation clause; when allowable
4305S.5
Interest accrual on past due loans
4305S.6
Method of computing interest
SECTION
4306S
Past Due Accounts
4306S.1
Accounts considered past due
4306S.2
Extension/renewal of loans
4306S.3
Write-off of loans as bad debts
4306S.4
Updating of information provided to credit
information bureaus
xv
SECTION
4307S
"Truth in Lending Act" Disclosure Requirements
4307S.1
Definition of terms
4307S.2
Information to be disclosed
4307S.3
Inspection of contracts covering credit
transactions
4307S.4
Posters
4307S.5
Sanctions and penal provisions
SECTION
4308S
Restructured Loans; General Policy
SECTION
4309S
Renewal of Loans
SECTION
4310S
Minimum Required Disclosure
SECTION
4311S
Unfair Collection Practices
SECTION
4312S
Confidentiality of Information
SECTION
4313S
Sanctions
SECTIONS
4314S - 4320S (Reserved)
B. SECURED LOANS
SECTION
4321S
Kinds of Security
SECTIONS
4322S - 4335S (Reserved)
C. - D. (RESERVED)
SECTION
4336S
(Reserved)
SECTION
4337S
Salary Loans
4337S.1 Definition of terms
SECTIONS
4338S - 4355S (Reserved)
E. LOANS/CREDIT ACCOMMODATIONS TO TRUSTEES, OFFICERS,
STOCKHOLDERS AND THEIR RELATED INTERESTS
SECTION
4356S
General Policy
SECTION
4357S
Direct/Indirect Borrowings; Ceilings
xvi
SECTION
4358S
Records; Reports
SECTIONS
4359S - 4369S (Reserved)
SECTION
4370S
Sanctions
F. - I. (RESERVED)
SECTIONS
4371S - 4390S (Reserved)
J. OTHER OPERATIONS
SECTION
4391S
Fund Investments
4391S.1 - 4391S.2 (Reserved)
4391S.3
Investment in debt and marketable equity securities
4391S.4 - 4391S.10 (Reserved)
SECTION
4392S
Loan Portfolio and Other Risk Assets Review System
SECTIONS
4393S - 4395S (Reserved)
K. MISCELLANEOUS PROVISIONS
SECTIONS
4396S - 4398S (Reserved)
SECTION
4399S
PART FOUR -
General Provision on Sanctions
BSP REGULATIONS ON FINANCIAL CONSUMER
PROTECTION
A. CONSUMER PROTECTION OVERSIGHT FUNCTION
SECTION
4401S
Consumer Protection Oversight Function
4401S.1
Role and Responsibility of the Board and Senior
Management
4401S.2
Consumer Protection Risk Management Syetem
(CPRMS)
B. CONSUMER PROTECTION STANDARDS OF CONDUCT FOR BSFIS
SECTION
4402S Consumer Protection Standards
4402S.1
Disclosure and Transparency
4402S.2
Protection of Client Information
xvii
4402S.3
4402S.4
4402S.5
Fair Treatment
Effective Recourse
Financial Education and Awareness
C. ENFORCEMENT ACTIONS
SECTION
4403S
Enforcement Actions
SECTIONS
4404S - 4499S
(Reserved)
PART FIVE - (RESERVED)
SECTIONS
4501S - 4599S (Reserved)
PART SIX - MISCELLANEOUS
A. OTHER OPERATIONS
SECTION
4601S
Fines and Other Charges
4601S.1
Guidelines on the imposition of monetary
penalties; payment of penalties or fines
SECTIONS
4602S - 4630S (Reserved)
SECTION
4631S
SECTIONS
4632S - 4640S (Reserved)
SECTION
4641S
Electronic Services
SECTION
4642S
Issuance and Operations of Electronic Money
4642S.1
Declaration of policy
4642S.2
Definitions
4642S.3
Prior Bangko Sentral approval
4642S.4
Common provisions
4642S.5
Quasi-bank license requirement
4642S.6
Sanctions
4642S.7
Transitory provisions
4642S.8 - 4642S.10 (Reserved)
4642S.11 Outsourcing of services by Electronic Money
Issuers (EMIs) to Electronic Money Network
Service Providers (EMNSP)
Revocation/Suspension of Non-Stock Savings and Loans
Association License
xviii
SECTIONS
4643S - 4649S (Reserved)
SECTION
4650S
Philippine and Foreign Currency Notes and Coins
B. SUNDRY PROVISIONS
SECTION
4651S
Notice of Dissolution
SECTION
4652S
Confidential Information
SECTION
4653S
Examination by the Bangko Sentral
SECTION
4654S
Applicability of Other Rules
SECTION
4655S
Annual Supervisory Fees
SECTION
4656S
Basic Law Governing Non-Stock Savings and Loan
Associations
SECTION
4657S
Non-Stock Savings and Loan Associations Premises and
Other Fixed Assets
4657S.1
Accounting for non-stock savings and loans
associations premises; other fixed assets
4657S.2
(Reserved)
4657S.3
Reclassification of real and other properties
acquired as non-stock savings and loans
association premises
4657S.4 - 4657S.8 (Reserved)
4657S.9
Batas Pambansa Blg. 344 - An Act to Enhance
the Mobility of Disabled Persons by Requiring
Certain Buildings, Institutions, Establishments
and Public Utilities to Install Facilities and Other
Devices
4657S.10 Republic Act No. 9994 - An Act Granting
Additional Benefits and Privileges to Senior
Citizens, Further Amending Republic Act No.
7432 of 1992 As Amended by Republic Act
No. 9257 of 2003.
SECTIONS
4658S - 4659S (Reserved)
xix
SECTION
4660S
Disclosure of Remittance Charges and Other Relevant
Information
SECTIONS
4661S - 4690S (Reserved)
SECTION
4691S
SECTIONS
4692S - 4694S (Reserved)
SECTION
4695S
SECTIONS
4696S - 4698S (Reserved)
SECTION
4699S
Anti-Money Laundering Regulations
4691S.1 - 4691S.8 (Reserved)
4691S.9
Sanctions and penalties
Valid Identification Cards for Financial Transactions
General Provision on Sanctions
xx
List of Appendices
14.12.31
LIST OF APPENDICES
No.
SUBJECT MATTER
S-1
Safeguards in Bonding of NSSLA Accountable Officers and Employees
S-2
List of Reports Required from Non-Stock Savings and Loan Associations
Annex S-2-a - Reporting Guidelines on Crimes/Losses
S-3
Guidelines on Prescribed Reports Signatories and Signatory Authorization
Annex S-3-a - Format of Resolution for Signatories of Category A-1
Reports
Annex S-3-b - Format of Resolution for Signatories of Category A-2
Reports
Annex S-3-c - Format of Resolution for Signatories of Categories A-3
and B Reports
S-4
Format of Disclosure Statement on Small Business/Retail/Consumer
Credit
S-5
Abstract of "Truth in Lending Act" (Republic Act No. 3765)
S-6
Anti-Money Laundering Regulations (Deleted pursuant to Circular No.
706 dated 05 January 2011)
Annex S-6-a - Certification of Compliance with Anti-Money
Laundering Regulations (Deleted pursuant to Circular
No. 706 dated 05 January 2011)
Annex S-6-b - Rules on Submission of Covered Transaction Reports
and Suspicious Transaction Reports by Covered
Institutions (Deleted pursuant to Circular No. 706
dated 05 January 2011)
S-7
Revised Implementing Rules and Regulations R.A. No. 9160, as
amended by R.A. No. 9194 (Deleted pursuant to Circular No. 706 dated
05 January 2011)
S-8
Guidelines to Govern the Selection, Appointment, Reporting
Requirements and Delisting of External Auditors and/or Auditing Firm
of Covered Entities
xix
List of Appendices
14.12.31
LIST OF APPENDICES
No.
SUBJECT MATTER
S-9
Guidelines in Classifying Loans and Other Risk Assets and Setting up
Allowance for Probable Losses
S - 10
Guidelines and Procedures Governing the Consumer Assistance
Management System (CAMS) of BSP-Supervised Financial Institutions
xx
§§ 4101S - 4101S.2
08.12.31
PART ONE
ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. SCOPE OF AUTHORITY
Section 4101S Scope of Authority of
Non-Stock Savings and Loan Associations
(NSSLA). An NSSLA shall include any nonstock, non-profit corporation engaged in the
business of accumulating the savings of its
members and using such accumulations for
loans to members to service the needs of
households by providing long-term financing
for home building and development and for
personal finance. An NSSLA may also
engage in a death benefit program meant
exclusively for the benefit of its members.
An NSSLA shall accept deposits from
and grant loans to its members only and shall
not transact business with the general public.
§ 4101S.1 Membership
a. NSSLAs shall issue a certificate of
membership to every qualified member and
shall maintain a registry of their members.
b. An NSSLA shall confine its
membership to a well-defined group of
persons.
A well-defined group shall consist of any
of the following:
(1) Employees, officers, and trustees of
one (1) company, including memberretirees;
(2) Government employees belonging to
the same office, branch, or department,
including member-retirees; and
(3) Immediate members of the families
up to the second degree of consanguinity or
affinity of those falling under Items “(1)” and
“(2)” above.
NSSLAs whose articles of incorporation
and by-laws were approved and registered
prior to the effectivity of R. A. No. 8367 and
which limit and/or allow membership
coverage broader or narrower than the
1
foregoing definition, shall be allowed to
continue as such.
The Monetary Board may, as
circumstances warrant, require NSSLAs
mentioned in the immediately preceding
paragraph to amend their by-laws to comply
with the concept of a well-defined group.
c. In no case shall the total amount of
entrance fees exceed one percent (1%) of
the amount to be contributed or otherwise
paid-in by the particular member: Provided,
That for new members, the fee shall be based
on the amount of contributions computed
in accordance with the revaluation of the
assets of the NSSLA.
§
4101S.2
Organizational
requirements1
a. Articles of Incorporation; by-laws
The articles of incorporation and by-laws
of a proposed NSSLA, or any amendment
thereto, shall not be registered with the SEC
unless accompanied by a certificate of
approval from the Monetary Board.
b. Application for approval. The articles
of incorporation and by-laws of a proposed
NSSLA, both accomplished in the
prescribed forms, shall be submitted to the
Monetary Board through the appropriate
department of the SES together with a
covering application for the approval
thereof, signed by a majority of the board of
trustees and verified by one of them. The
application shall include:
(1) The proposed articles of
incorporation and by-laws together with the
names and addresses of the incorporators,
trustees and officers, with a statement of
their character, experience,and general
fitness to engage in the non-stock savings
and loan business;
See SEC Circular No. 3 dated 16 February 2006.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part I - Page 1
§§ 4101S.2 - 4106S.1
13.12.31
(2) An itemized statement of the
estimated receipts and expenditures of the
proposed NSSLA for the first year;
(3) Filing fee of P1,000; and
(4) Such other information as the
Monetary Board may require.
c. Grounds for disapproval of
application. The Monetary Board may deny
the application to organize an NSSLA on the
basis of a finding that:
(1) The NSSLA is being organized for
any purpose other than to engage in the
business of a legitimate NSSLA;
(2) The NSSLA’s financial program is
unsound;
(3) The proposed members are
adequately served by one (1) or more
existing NSSLAs; and
(4) There exist other reasons which the
Monetary Board may consider as sufficient
ground for such disapproval.
d. Certificate of authority to operate;
revocation or suspension thereof. NSSLAs,
prior to transacting business, shall procure
a certificate of authority to transact business
from the Monetary Board. After due notice
and hearing, the Monetary Board may
revoke or suspend, for such period as it
determines, the certificate of authority of any
NSSLA, the solvency of which is imperiled
by losses or irregularities, or of any NSSLA
which willfully violates any provision of
R. A. No. 8367, these rules or any pertinent
law or regulation.
(As amended by CL-2008-078 dated 15 December 2008)
Secs. 4102S - 4105S (Reserved)
B. CAPITALIZATION
Sec. 4106S Capital of NSSLAs. A newly
organized NSSLA shall have a minimum
initial aggregate capital contribution of P1.0
million. Thereafter, an NSSLA shall maintain
a minimum capital that would allow it to
comply with the capital adequacy ratio
requirement as provided under Sec. 4116S.
S Regulations
Part I - Page 2
NSSLAs shall adopt policies to
encourage their members to increase their
capital contributions which shall be
classified by the NSSLA as either fixed/nonwithdrawable or withdrawable capital in
accordance with the definition provided
under Subsec. 4106S.1. Partial withdrawal
from the amount paid by a member as
withdrawable capital contributions, during
his membership, may be allowed unless the
by-laws of the NSSLA provide otherwise:
Provided, That policies allowing the partial
withdrawal by a member of his
withdrawable capital contributions shall
comply with the provisions of Subsec.
4106S.1.
(As amended by Circular Nos.789 dated 28 February 2013 and
573 dated 22 June 2007)
§ 4106S.1 Regulatory treatment of
capital contributions of members. An
NSSLA shall ensure that monies received
representing capital contributions are duly
registered in the books of the Association
under the name of the member making such
contributions.
Capital contributions of members shall
be classified by an NSSLA as either fixed/
non-withdrawable or withdrawable as
herein defined.
a. Fixed/non-withdrawable capital refers
to the member’s capital contribution in the
NSSLA which he must maintain for the
duration of his membership thereon.
(1) Minimum Amount - Every member
of an NSSLA shall be required to maintain
a fixed/non-withdrawable capital
contribution of at least P1,000.00 unless a
higher minimum is prescribed under the
NSSLA’s by-laws.
(2) Ceiling. An NSSLA shall encourage
all its members to increase their fixed/nonwithdrawable capital over time beyond
the minimum amount prescribed under Item
“(1)” hereof.
However, to ensure that control over
the affairs of the NSSLA remains
Manual of Regulations for Non-Bank Financial Institutions
§§ 4106S.1 - 4116S
13.12.31
broad-based, the total amount that a
member and/or his immediate family may
contribute as fixed/ non-withdrawable
contributions shall be subject to a ceiling
which shall be determined by the board
of trustees and duly confirmed by the
NSSLA’s general assembly. The prescribed
ceiling shall be applied uniformly to all
members: Provided, That in cases where
the NSSLA is unable to comply with the
capital adequacy ratio requirement as
provided under Sec. 4116S, any deviation
from the uniform application of or settingup of aforesaid ceiling may be allowed.
b. Withdrawable capital refers to the
amount of capital contributions which may
be withdrawn by a member pursuant to the
terms and conditions prescribed under the
NSSLA’s by-laws, or as approved by the
board of trustees and duly confirmed by
the NSSLA’s general assembly.
(1) Ceiling. At no time shall the total
withdrawable capital contributions of a
member and that of his immediate family,
as defined in Subsec. 4101S.1.b(3), exceed
ten times (10X) their fixed/non-withdrawable
capital contributions.
(2) Restrictions on withdrawability.
Notwithstanding the capital contributions’
withdrawability, the NSSLA shall establish
and prescribe the conditions and/or
circumstances when the NSSLA may limit
the withdrawal of the
members’
withdrawable capital contributions, such as,
when the NSSLA is under liquidity stress
or is unable to meet the capital adequacy
ratio requirement under Sec. 4116S.
c. Limit on total capital contributions.
NSSLAs shall prescribe a maximum amount
on the total amount of fixed and
withdrawable capital contributions that a
family group [i.e., member and his
immediate family as defined under Subsec.
4101S.1.b(3)] may hold in an NSSLA.
Transitory provisions. An NSSLA shall
have one (1) year period reckoned from
22 March 2013 within which to amend the
pertinent provisions of its by-laws and
written policies to comply with the
foregoing requirements: Provided, That
amounts held in excess of the prescribed
ceiling under Item “b.(1)” hereof as of
22 March 2013 shall be allowed to
continue as such but once reduced shall not
thereafter be increased beyond the
prescribed ceiling.
(As amended by Circular No. 789 dated 28 February 2013)
§§ 4106S.2 - 4106S.6 (Reserved)
§ 4106S.7 Revaluation surplus. In cases
of both retiring and new members, a
revaluation surplus shall be added to their
contributions by imputing their respective
proportionate shares in the withdrawable
share reserve and the reserve for furniture,
fixtures, and furnishings.
(As amended by Circular No. 789 dated 28 February 2013)
Secs. 4107S - 4110S (Reserved)
C. (RESERVED)
Secs. 4111S - 4115S (Reserved)
D. CAPITAL-TO-RISK ASSETS RATIO
Sec. 4116S Capital-to-Risk Assets Ratio
Capital-to-risk assets ratio (CAR) is an
important tool to measure solvency and
effectively manage the risk-taking activities
of an NSSLA, determine its capacity to
absorb unexpected losses, and adequately
provide protection to members and
creditors.
The CAR, expressed as a percentage of
total capital accounts to total risk assets shall
not be less than ten percent (10%).
For purposes of computing CAR, the
aggregate amount of withdrawable capital
contributions that shall be allowed to form
part of an NSSLA’s total capital accounts
shall be capped at ten times (10X) the
aggregate amount of fixed/non-withdrawable
capital contributions.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part I - Page 3
§§ 4116S - 4118S
13.12.31
The total risk asset is defined as total
assets minus the following assets:
a. Cash on hand;
b. Evidences of indebtedness of the
Republic of the Philippines and any other
evidences of indebtedness/obligations, the
servicing and repayment of which are fully
guaranteed by the Republic of the
Philippines;
c. Loans to the extent covered by holdout on, or assignment of, deposits
maintained in the lending NSSLA;
d. Office premises, depreciated;
e. Furniture, fixtures and equipment,
depreciated;
f. Real estate mortgage loans guaranteed
by the Home Guarantee Corporation to the
extent covered by the guarantee; and
g. Other non-risk items as the Monetary
Board may, from time to time, authorize to
be deducted from total assets.
The Monetary Board shall prescribe the
manner of determining the total assets of
such NSSLA for the purpose of this Section,
but contingent accounts shall not be
included among total assets.
Whenever the capital accounts of an
NSSLA are deficient with respect to the
preceding paragraph, the Monetary Board,
after considering the report of the
appropriate department of the SES on the
state of solvency of the NSSLA concerned,
shall limit or prohibit the distribution of net
income and shall require that part or all of
net income be used to increase the capital
accounts of the NSSLA until the minimum
requirement has been met. The Monetary
Board may, after considering the aforesaid
report of the appropriate department of the
SES, and if the amount of the deficiency
justifies it, restrict or prohibit the making of
new investments of any sort by the NSSLA
with the exception of the purchases of
evidence of indebtedness included under
Item “b” of this Section until the minimum
required capital ratio has been restored.
S Regulations
Part I - Page 4
Transitory provisions. An NSSLA which
failed to meet the minimum CAR as
prescribed above shall have until 30 June
2013 within which to comply.
(As amended by Circular Nos. 789 dated 28 February 2013 and
573 dated 22 June 2007)
Sec. 4117S Withdrawable Share Reserve
NSSLAs shall create a withdrawable share
reserve which shall consist of two percent
(2%) of the total capital contributions of the
members.
An amount corresponding to the
withdrawable share reserve shall be set up
by the NSSLA, such amount invested in
bonds or evidences of indebtedness of the
Republic of the Philippines or of its
subdivisions, agencies or instrumentalities,
the servicing and repayment of which are
fully guaranteed by the Republic of the
Philippines, and evidences of indebtedness
of the Bangko Sentral.
For a uniform interpretation of the
provisions of this Section, the following shall
serve as guidelines:
a. The withdrawable share reserve shall
be set up from the undivided profits of the
NSSLA and shall be funded in the form of
cash deposited as a separate account and/
or an investment allowed under this Section;
b. Should there be an increase in the
capital contribution, the reserve shall be
correspondingly adjusted at the end of each
month from undivided profits, if any; and
c. The reserve shall be adjusted first
before the NSSLA shall declare and
distribute to its members any portion of its
net income at any time of the year.
(As amended by Circular No. 573 dated 22 June 2007)
Sec. 4118S Surplus Reserve for Ledger
Discrepancies. Whenever an NSSLA has a
discrepancy between its general ledger
accounts and their respective subsidiary
ledgers, the board of trustees of the NSSLA
shall set up from the undivided profits of
the NSSLA, if any, a surplus reserve, in an
Manual of Regulations for Non-Bank Financial Institutions
§§ 4118S - 4126S
13.12.31
amount equivalent to the amount of the
discrepancy, and this reserve shall not be
available for distribution to members or for
any other purpose unless and until the
discrepancy is accounted for. The board of
trustees shall also direct the employee
responsible for the discrepancy to account
for said discrepancy: Provided, That the
failure of the employee to do so shall
constitute as ground for his dismissal if the
discrepancy is of serious or recurring nature.
(As amended by Circular Nos. 661 dated 01 September 2009
and 573 dated 22 June 2007)
Sec. 4119S Reserve for Office Premises,
Furniture, Fixtures and Equipment. NSSLAs
shall set aside five percent (5%) of their
yearly net income until it amount to at least
five percent (5%) of the total assets as a
reserve for a building fund to cover the cost
of construction or acquisition of office
premises, and of the purchase of office
furniture, fixtures and equipment.
An NSSLA which, as determined by its
board of trustees, has adequate office
premises, furniture, fixtures and equipment
necessary for the conduct of its business
need not set up the reserve: Provided, That
this fact should be certified by its board of
trustees in a resolution to be submitted to
the appropriate department of the SES for
verification and approval: Provided,
however, That in case reserves had been
set up, the NSSLA so exempted may revert
the reserves to free surplus.
(As amended by Circular No. 573 dated 22 June 2007)
Sec. 4120S (Reserved)
E. (RESERVED)
Secs. 4121S - 4125S (Reserved)
F. NET INCOME DISTRIBUTION
Sec. 4126S Limitations on Distribution of
Net Income
a. Amount available for income
distribution. An NSSLA may distribute net
income to members out of its adjusted
Undivided Profits and the balance of its
Surplus Free account as of the calendar yearend or fiscal year-end immediately preceding
the date of net income distribution:
Provided, That in addition to the
requirements as provided in this Section, in
no case shall the NSSLA distribute any of
its net income and/or surplus to its members
if its CAR and capital contributions are
below the level required under Secs. 4106S
and 4116S , respectively.
b. Basis for participation in profits
Member-contributors of an NSSLA may
participate in the profits of the NSSLA on
the basis of the balances of their capital
contributions as determined by the board
of trustees: Provided, That an NSSLA shall
distribute net income to members only once
in a calendar or fiscal year adopted by such
NSSLA.
c. Level of withdrawable share reserve
No NSSLA shall distribute any of its net
income to its members if the withdrawable
share reserve required under Sec. 4117S is
less than, or by such distribution would be
reduced below, the amount specified in said
Section. The reserve shall be adjusted first
before the NSSLA shall distribute its net
income for the year.
d. Discrepancies between the general
ledger and subsidiary ledger accounts. The
surplus reserves set up as required under
Sec. 4118S shall not be reverted to Surplus
Free available for distribution to members
unless and until the discrepancy between
the general ledger accounts and their
respective subsidiary ledgers for which the
surplus reserve has been set up ceases to
exist.
e. Other unbooked capital adjustments
required by Bangko Sentral, whether or not
allowed to be set up on a staggered basis
The unbooked loss reserves and other
unbooked capital adjustments required by
the Bangko Sentral based on the latest
approved Report of Examination of the
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§§ 4126S - 4141S.2
13.12.31
NSSLA, whether or not allowed to be set
up on a staggered basis, shall be deducted
from the amount of net income available for
distribution to members.
f. Interest and other income earned but
not yet collected/received, net of allowance
for credit losses. Accrued interest and other
income not yet received but already
recorded by an NSSLA from financial assets,
net of allowance for credit losses, shall be
deducted from the amount of net income
available for distribution to members.
(As amended by Circular Nos. 789 dated 28 February 2013 and
573 dated 22 June 2007)
§ 4126S.1 Reporting and verification
Declaration of income for distribution to
members shall be reported by an NSSLA
concerned to the appropriate department of
the SES in the prescribed form (Revised BSP
Form No. 7-26-25H) within ten (10) business
days after date of declaration.
Pending verification of abovementioned
report by the appropriate department of the
SES, the NSSLA concerned shall not make
any announcement or communication on
the intended distribution of net income or
shall any actual distribution be made
thereon.
In any case, the declaration may be
announced and the income distributed, if
after twenty (20) business days from the date
of the report required herein shall have been
received by the Bangko Sentral, no advice
against such distribution has been received
by the NSSLA concerned.
(As amended by Circular Nos. 661 dated 01 September 2009
and 573 dated 22 June 2007)
§ 4126S.2 Recording of net income for
distribution. The liability for members’ share
in the net income distribution shall be taken
up in the books upon receipt of Bangko
Sentral approval thereof, or if no such
approval is received, after twenty (20)
business days from the date the required
Report on Distributable Net Income was
received by the appropriate department of
S Regulations
Part I - Page 6
the SES whichever comes earlier. A
memorandum entry may be made to trustees
and for full disclosure purposes, the amount
of income for distribution may be disclosed
in the financial statements by means of a
footnote which should include a statement
to the effect that the distribution is subject
to review by the Bangko Sentral.
(As amended by Circular No. 573 dated 22 June 2007)
Secs. 4127S - 4140S (Reserved)
G. TRUSTEES, OFFICERS, EMPLOYEES
AND AGENTS
Strengthening Corporate Governance. It
is the thrust of the Bangko Sentral to
continuously strengthen corporate governance
in its supervised financial institutions
cognizant that this is central in sustaining
the resiliency and stability of the financial
system. In this light, the Bangko Sentral is
aligning its existing regulations with
international best practices that promote
good corporate governance such as the
“Principles for Enhancing Corporate
Governance” issued by the Basel Committee
on Banking Supervision.
(Circular No. 749 dated 27 February 2012)
Sec. 4141S Definition; Qualifications;
Responsibilities and Duties of Trustees
For purposes of this Section, the following
shall be the definition, qualifications,
responsibilities and duties of trustees.
§ 4141S.1 Definition of trustees
Trustees shall include: (a) those who are
named as such in the articles of
incorporation; (b) those duly elected in
subsequent meetings of the NSSLA’s
members; and (c) those elected to fill
vacancies in the board of trustees.
§ 4141S.2 Qualifications of trustees
No person shall be eligible as trustee of an
NSSLA unless he is a member of good
standing of such NSSLA.
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§§ 4141S.2 - 4141S.5
13.12.31
In addition, such person shall have the
qualifications and none of the
disqualifications as provided in pertinent
laws and Bangko Sentral rules. A trustee
shall have the following minimum
qualifications:
(1) He shall be at least twenty five (25)
years of age at the time of his election or
appointment;
(2) He shall be at least a college graduate
or have at least five (5) years experience in
business, or shall have undergone any
Bangko Sentral training in NSSLA or banking
operations: Provided, however, That an
undergraduate eligible to be elected as
trustee in the NSSLA’s by-laws may be
allowed as may be approved by the Bangko
Sentral: Provided, further, That Bangko
Sentral approval shall no longer be required
for a re-elected college undergraduate who
was previously allowed to sit as trustee:
Provided, finally, That (1) the previous
approval was obtained on or after
01 January 2011; and (2) the trustee has had
continuous service within the said NSSLA;
(3) He must have attended a special
seminar on corporate governance for board
of trustees conducted or accredited by the
Bangko Sentral; and
(4) He must be fit and proper for the
position of a trustee of the NSSLA. In
determining whether a person is fit and
proper for the position of a trustee, the
following matters must be considered:
integrity/probity, physical/mental fitness,
competence, relevant education/financial
literacy/training, diligence and knowledge/
experience.
The members of the board of trustees
shall possess the foregoing qualifications for
trustees in addition to those required or
prescribed under R.A. No. 8791 and other
existing applicable laws and regulations.
(As amended by Circular No. 800 dated 21 June 2013)
§ 4141S.3 Powers/responsibilities and
duties of trustees. The corporate powers of
an NSSLA shall be exercised, its business
conducted and all its property controlled
and held by its board of trustees. The powers
of the board of trustees as conferred by law
are original and cannot be revoked by the
members. The trustees hold their office
charged with the duty to exercise sound and
objective judgment for the best interest of
the NSSLA.
(As amended by Circular Nos.757 dated 08 May 2012 and 749
dated 27 February 2012)
§ 4141S.4 General responsibility of the
board of trustees. The position of an NSSLA
trustee is a position of trust. A trustee
assumes certain responsibilities to different
constituencies or stakeholders, i.e., the
NSSLA itself, member-depositors, its clients
and other creditors, its management and
employees, the regulators, deposit insurer
and the public at large. These constituencies
or stakeholders have the right to expect that
the institution is being run in a prudent and
sound manner. The board of trustees is
primarily responsible for approving and
overseeing the implementation of the
NSSLA’s strategic objectives, risk strategy,
corporate governance and corporate values.
Further, the board of trustees is also
responsible for monitoring and overseein the
performance of senior management as the
latter manages the day- to- day affairs of the
institution.
(As amended by Circular Nos. 757 dated 08 May 2012 and 749
dated 27 February 2012)
§ 4141S.5 Duties and responsibilities
a. Board of trustees
(1) To approve and monitor the
implementation of strategic objectives
Consistent with the institution’s strategic
objectives, business plans shall be
established for the NSSLA including its trust
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§ 4141S.5
12.12.31
operations, and initiatives thereto shall be
implemented with clearly defined
responsibilities and accountabilities. These
shall take into account the NSSLA’s longterm financial interests, its level of risk
tolerance and its ability to manage risks
effectively. The board shall establish a
system for measuring performance against
plans through regular monitoring and
reviews, with corrective action taken as
needed.
The board shall likewise ensure that the
NSSLA has beneficial influence on the
economy by continuously providing services
and facilities which will be supportive of
the national economy.
(2) To approve and oversee the
implementation of policies governing major
areas of NSSLA operations. The board shall
approve policies on all major business
activities, e.g., investments, loans, asset and
liability management, trust, business
planning and budgeting. The board shall
accordingly define the NSSLA’s level of risk
tolerance in respect of said activities. A
mechanism to ensure compliance with said
policies shall also be provided.
The board shall set out matters and
authorities reserved to it for decision, which
include, among others, major capital
expenditures, equity investments and
divestments. The board shall also establish
the limits of the discretionary powers of each
officer, committee, sub-committee and such
other groups for purposes of lending,
investing or any other financial undertaking
that exposes the NSSLA to significant risks.
(3) To approve and oversee the
implementation of risk management
policies. The board of trustees shall be
responsible for defining the NSSLA’s level
of risk tolerance and for the approval and
oversight of the implementation of policies
and procedures relating to the management
of risks throughout the institution, including
S Regulations
Part I - Page 8
its trust operations. The risk management
policy shall include:
(a) a comprehensive risk management
approach;
(b) a detailed structure of limits,
guidelines and other parameters used to
govern risk-taking;
(c) a clear delineation of lines of
responsibilities for managing risk;
(d) an adequate system for measuring
risk; and
(e) effective internal controls and a
comprehensive risk-reporting process. The
board of trustees shall ensure that a robust
internal reporting system is in place that shall
enable each employee to contribute to the
appreciation of the NSSLA’s overall risk
exposures.
The board of trustees shall ensure that
the risk management function is given
adequate resources to enable it to effectively
perform its functions. The risk management
function shall be afforded with adequate
personnel, access to information technology
systems and systems development
resources, and support and access to
internal information.
(4) To oversee selection and
performance of senior management. It is the
primary responsibility of the board of
trustees to appoint competent management
team at all times, monitor and assess the
performance of the management team based
on established performance standards that
are consistent with the NSSLA’s strategic
objectives, and conduct regular review of
NSSLA’s policies with the management
team.
(a) The board of trustees shall apply fit
and proper standards on key personnel.
Integrity, technical expertise and experience
in the institution’s business, either current
or planned, shall be the key considerations
in the selection process. And because
mutual trust and a close working
relationship are important, the members of
senior management shall uphold the general
Manual of Regulations for Non-Bank Financial Institutions
§ 4141S.5
12.12.31
operating philosophy, vision and core values
of the institution. The board of trustees shall
replace members of senior management,
when necessary, and have in place an
appropriate plan of succession.
(b) The board of trustees shall regularly
monitor the actions of senior management
and ensure that these are consistent with
the policies that it has approved. It shall put
in place formal performance standards to
be able to effectively assess the performance
of senior management. The performance
standards shall be consistent with the
NSSLA’s strategic objectives and business
plans, taking into account the NSSLA’s longterm financial interests.
(c) The board of trustees shall regularly
meet with senior management to engage in
discussions, question and critically review
the reports and information provided by the
latter. The board of trustees shall set the
frequency of meeting with senior
management taking into account the size,
complexity of operations and risk profile of
the NSSLA.
(d) The board of trustees shall regularly
review policies, internal controls and self
assessment functions (e.g., internal audit,
risk management and compliance) with
senior management to determine areas for
improvement as well as to promptly identify
and address significant risks and issues. The
board of trustees shall set the frequency of
review taking into account the size,
complexity of operations and risk profile of
the NSSLA.
The board of trustees shall ensure that
senior management’s expertise and
knowledge shall remain relevant given the
NSSLA’s strategic objectives, complexity of
operations and risk profile.
(5) To consistently conduct the affairs
of the institution with a high degree of
integrity. Since reputation is a very valuable
asset, it is in the institution’s best interest
that in dealings with the public, it observes
a high standard of integrity. The board of
trustees shall lead in establishing the tone
of good governance from the top and in
setting corporate values, codes of conduct
and other standards of appropriate behavior
for itself, the senior management and other
employees. The board of trustees shall:
(a) Articulate clear policies on the
handling of any transaction with directors,
officers, stockholders, and their related
interests (DOSRI) and other related parties
ensuring that there is effective compliance
with existing laws, rules and regulations at
all times and no stakeholder is unduly
disadvantaged. In this regard, the board of
trustees shall define “related party
transaction”, which is expected to cover a
wider definition than DOSRI under existing
regulations and a broader spectrum of
transactions (i.e., not limited to credit
exposures), such that relevant transactions
that could pose material risk or potential
abuse to the NSSLA and its stakeholders are
captured.
(b) Require the NSSLA’s members to
confirm by majority vote, in the annual
members’ meeting, the NSSLA’s significant
transactions with its DOSRI and other
related parties.
(c) Articulate acceptable and
unacceptable activities, transactions and
behaviors that could result or potentially
result in conflict of interest, personal gain
at the expense of the institution, or unethical
conduct.
(d) Articulate policies that will prevent
the use of the facilities of the NSSLA in
furtherance of criminal and other improper
or illegal activities, such as but not limited
to financial misreporting, money
laundering, fraud, bribery or corruption.
(e) Explicitly discourage the taking of
excessive risks as defined by internal policies
and establish an employees’ compensation
scheme effectively aligned with prudent risk
taking. The compensation scheme shall be
adjusted for all types of risk and sensitive to
the time horizon of risk. Further, the grant
of compensation in forms other than cash
shall be consistent with the overall risk
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§ 4141S.5
12.12.31
alignment of the NSSLA. The board of
trustees shall regularly monitor and review
the compensation scheme to ensure that it
operates and achieves the objectives as
intended.
(f) Ensure that employee pension funds
are fully funded or the corresponding liability
appropriately recognized in the books of the
NSSLA at all times. Further, the board of
trustees shall ensure that all transactions
involving the pension fund are conducted
at arm’s length terms.
(g) Allow employees to communicate,
with protection from reprisal, legitimate
concerns about illegal, unethical or
questionable practices directly to the board
of trustees or to any independent unit.
Policies shall likewise be set on how such
concerns shall be investigated and
addressed, for example, by an internal
control function, an objective external party,
senior management and/or the board itself.
(h) Articulate policies in communicating
corporate values, codes of conduct and other
standards in the NSSLA as well as the means
to confidentially report concerns or
violations to an appropriate body.
(6) To define appropriate governance
policies and practices for the NSSLA and
for its own work and to establish means to
ensure that such are followed and
periodically reviewed 1 for ongoing
improvement. The board of trustees,
through policies and its own practices, shall
establish and actively promote,
communicate and recognize sound
governance principles and practices to
reflect a culture of strong governance in the
NSSLA as seen by both internal and external
stakeholders.
(a) The board of trustees shall ensure
that the NSSLA’s organizational structure
facilitates effective decision-making and
good governance. This includes clear
definition and delineation of the lines of
responsibility and accountability, especially
between the roles of the Chairman of the
board of trustees and Chief Executive
Officer/President.
(b) The board of trustees shall maintain,
and periodically update, organizational
rules, by-laws, or other similar documents
setting out its organization, rights,
responsibilities and key activities.
(c) The board of trustees shall restructure
itself in a way, including in terms of size,
frequency of meetings and the use of
committees, so as to promote efficiency,
critical discussion of issues and thorough
review of matters. It shall meet regularly to
properly discharge its functions. It shall also
ensure that independent views in board
meetings shall be given full consideration
and all such meetings shall be duly minuted.
(d) The board shall conduct and
maintain the affairs of the institution within
the scope of its authority as prescribed in
its charter and in existing laws, rules and
regulations. It shall ensure effective
compliance with the latter, which include
prudential reporting obligations. Serious
weaknesses in adhering to these duties and
responsibilities may be considered as unsafe
and unsound NSSLA practice. The board
shall appoint a compliance officer who shall
be responsible for coordinating, monitoring
and facilitating compliance with existing
laws, rules and regulations. The compliance
officer shall be vested with appropriate
authority and provided with appropriate
support and resources.
1
NSSLAs shall submit the following to the appropriate department of the SES within 90 calendar days from
17 March 2012:
(1) A Secretary’s Certificate attesting the approval of the board of trustees to changes in the policies.
(2) Acknowledgement receipt of copies of specific duties and responsibilities of the board of trustees and
of a trustee, and certification that they fully understand the same.
S Regulations
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§ 4141S.5
12.12.31
(e) The board of trustees shall establish
a system of checks and balances which
applies in the first instance to the board
itself. Among the members of the board, an
effective system of checks and balances
must exist. The system shall also provide a
mechanism for effective check and control
by the board over the chief executive officer
and key managers and by the latter over the
line officers of the NSSLA. Checks and
balances in the board shall be enhanced by
appointing a chairperson who is a nonexecutive, whenever possible.
(f) The board of trustees shall assess at
least annually its performance and
effectiveness as a body, as well as its various
committees, the chief executive officer, the
individual trustee, and the NSSLA itself,
which may be facilitated by the corporate
governance committee or external
facilitators. The composition of the board
shall also be reviewed regularly with the
end in view of having a balanced
membership. Toward this end, a system and
procedure for evaluation shall be adopted
which shall include, but not limited to, the
setting of benchmark and peer group
analysis.
(g) The board shall ensure that individual
members of the board and the members are
accurately and timely informed. It shall
provide all its trustees and to the members
a comprehensive and understandable
assessment of the NSSLA’s performance,
financial condition and risk exposures. All
trustees shall have reasonable access to any
information about the institution at all times.
It shall also provide appropriate information
that flows internally and to the public.
(7) To constitute committees to increase
efficiency and allow deeper focus in specific
areas. The board of trustees shall create
committees, the number and nature of
which would depend on the size of the
NSSLA and the board, the complexity of
operations, long-term strategies and risk
tolerance level of the institution.
(a) The board of trustees shall approve,
review and update periodically, or the
respective charters of each committee or
other documents that set out its mandate,
scope and working procedures.
(b) The board of trustees shall appoint
members of the committees taking into
account the optimal mix of skills and
experience to allow the members to fully
understand, be critical and objectively
evaluate the issues. In order to promote
objectivity, the board of trustees, shall
appoint independent trustees and nonexecutive members of the board to the
greatest extent possible while ensuring that
such mix will not impair the collective skills,
experience, and effectiveness of the
committees.
(c) The board of trustees shall ensure that
each committee shall maintain appropriate
records (e.g., minutes of meetings or
summary of matters reviewed and decisions
taken) of their deliberations and decisions.
Such records shall document the
committee’s fulfillment of its responsibilities
and facilitate the assessment of the effective
dispense of its functions.
(d) The board of trustees shall constitute,
at a minimum, the audit committee. The
audit committee shall be composed of
members with accounting, auditing, or
related financial management expertise or
experience commensurate with the size,
complexity of operations and risk profile of
the NSSLA. To the greatest extent possible,
the audit committee shall be composed of a
sufficient number of non-executive board
members. Further, the chief executive
officer, chief financial officer and/or
treasurer shall not be appointed as members
of the audit committee.
The audit committee provides oversight
over the institution’s financial reporting
policies, practices and control and internal
and external audit functions. It shall be
responsible for the setting up of the internal
audit department and for the appointment
of the internal auditor as well as the
independent external auditor who shall both
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§ 4141S.5
12.12.31
report directly to the audit committee. In
cases of appointment or dismissal of external
auditors, it is encouraged that the decision
be made only by independent, nonexecutive audit committee members. It shall
monitor and evaluate the adequacy and
effectiveness of the internal control system.
The audit committee shall review and
approve the audit scope and frequency. It
shall receive key audit reports, and ensure
that senior management is taking necessary
corrective actions in a timely manner to
address the weaknesses, non-compliance
with policies, laws and regulations and other
issues identified by auditors.
The audit committee shall have explicit
authority to investigate any matter within its
terms of reference, full access to and
cooperation by management and full
discretion to invite any trustee or executive
officer to attend its meetings, and adequate
resources to enable it to effectively
discharge its functions. The audit committee
shall ensure that a review of the
effectiveness of the institution’s internal
controls, including financial, operational
and compliance controls, and risk
management, is conducted at least annually.
The audit committee shall establish and
maintain mechanisms by which officers and
staff shall, in confidence, raise concerns
about possible improprieties or malpractices
in matters of financial reporting, internal
control, auditing or other issues to persons
or entities that have the power to take
corrective action. It shall ensure that
arrangement are in place for the independent
investigation, appropriate follow-up action,
and subsequent resolution of complaints.
(8) To effectively utilize the work
conducted by the internal audit and
compliance functions and the external
auditors. The board of trustees shall
recognize and acknowledge the importance
of the assessment of the independent,
competent and qualified internal and
external auditors and compliance officers in
ensuring the safety and soundness of the
S Regulations
Part I - Page 10b
operations of an NSSLA on a going-concern
basis and communicate the same
throughout the NSSLA. This shall be
displayed by undertaking timely and
effective actions on issues identified.
Further, non-executive board members
shall meet regularly, other than in meetings
of the audit committee, in the absence of
senior management, with the external
auditor and heads of the internal audit and
compliance functions.
b. Specific duties and responsibilities of
a trustee
(1) To remain fit and proper for the
position for the duration of his term. A
trustee is expected to remain fit and proper
for the position for the duration of his term.
He should possess unquestionable
credibility to make decisions objectively and
resist undue influence. He shall treat board
trusteeship as a profession and shall have a
clear understanding of his duties and
responsibilities as well as his role in
promoting good governance. Hence, he
shall maintain his professional integrity and
continuously seek to enhance his skills,
knowledge and understanding of the
activities that the trustee is engaged in or
intends to pursue as well as the
developments in the NSSLA industry
including regulatory changes through
continuing education or training.
(2) To conduct fair business transactions
with the NSSLA and to ensure that personal
interest does not bias board decisions.
Trustees should, whenever possible, avoid
situations that would give rise to a conflict
of interest. If transactions with the
institution cannot be avoided, it should be
done in the regular course of business and
upon terms not less favorable to the
institution than those offered to others. The
basic principle to be observed is that a
trustee should not use his position to make
profit or to acquire benefit or advantage for
himself and/or his related interests. He
should avoid situations that would
compromise his impartiality.
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12.12.31
(3) To act honestly and in good faith,
with loyalty and in the best interest of the
NSSLA , its members, regardless of the
amount of their capital contributions, and
other stakeholders such as its depositors,
investors, borrowers, other clients and the
general public. A trustee must always act
in good faith, with the care which an
ordinarily prudent man would exercise
under similar circumstances. While a trustee
should always strive to promote the interest
of all members, he should also give due
regard to the rights and interests of other
stakeholders.
(4) To devote time and attention
necessary to properly discharge their duties
and responsibilities. Trustees should devote
sufficient time to familiarize themselves with
the institution’s business. They must be
constantly aware of the institution’s
condition and be knowledgeable enough to
contribute meaningfully to the board’s work.
They must attend and actively participate
in board and committee meetings, request
and review meeting materials, ask questions,
and request explanations. If a person cannot
give sufficient time and attention to the
affairs of the institution, he should neither
accept his nomination nor run for election
as member of the board.
(5) To act judiciously. Before deciding
on any matter brought before the board of
trustees, every trustee should thoroughly
evaluate the issues, ask questions and seek
clarifications when necessary.
(6) To contribute significantly to the
decision-making process of the board.
Trustees should actively participate and
exercise objective independent judgment on
corporate affairs requiring the decision or
approval of such board.
(7) To exercise independent judgment.
A trustee should view each problem/
situation objectively. When a disagreement
with others occurs, he should carefully
evaluate the situation and state his position.
He should not be afraid to take a position
even though it might be unpopular.
Corollarily, he should support plans and
ideas that he thinks will be beneficial to the
institution.
(8) To have a working knowledge of the
statutory and regulatory requirements
affecting the NSSLA institution, including the
content of its articles of incorporation and
by-laws, the requirements of the Bangko
Sentral and where applicable, the
requirements of other regulatory agencies.
A trustee should also keep himself informed
of the industry developments and business
trends in order to safeguard the institution’s
competitiveness.
(9) To observe confidentiality. Trustees
must observe the confidentiality of nonpublic information acquired by reason of
their position as trustees. They may not
disclose said information to any other person
without the authority of the board.
(As amended by Circular Nos.757 dated 08 May 2012 and 749
dated 27 February 2012)
Sec. 4142S Definition and Qualifications
of Officers. Officers shall include the
President, Vice-President, General Manager,
Corporate Secretary, Treasurer and others
mentioned as officers of the NSSLA, or
whose duties as such are defined in the bylaws.
The minimum qualifications for trustees
prescribed in Sec. 4141S are also applicable
to officers.
§ 4142S.1 Definition of officers
Officers shall include the president,
executive vice president, senior vice
president, vice president, general manager,
secretary, treasurer, and others mentioned
as officers of the NSSLA, or those whose
duties as such are defined in the by-laws,
or are generally known to be the officers of
the NSSLA (or any of its branches and offices
other than the head office) either through
announcement, representation, publication
or any kind of communication made by the
NSSLA. A person holding the position of
chairman, vice-chairman or any other
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§§ 4142S.1 - 4143S.1
12.12.31
position of the board who also performs
functions of management such as those
ordinarily performed by regular officers shall
also be considered an officer.
§ 4142S.2 Qualifications of officers
An officer shall have the following
minimum qualifications:
a. He shall be at least twenty-one (21)
years of age;
b. He shall be at least a college graduate
or have at least five (5) years experience in
NSSLA or banking operations or related
activities or in a field related to his position
and responsibilities, or have undergone
training in NSSLA or banking operations
acceptable to the appropriate department of
the SES;
c. He must be fit and proper for the
position of an officer of the NSSLA. In
determining whether a person is fit and
proper for the position of an officer, the
following matters must be considered:
integrity/probity, competence, education,
diligence, and experience/training. The
foregoing qualifications for officers shall be
in addition to those already required or
prescribed by R.A. No. 8367, as amended,
and other existing applicable laws and
regulations.
§ 4142S.3 Duties and responsibilities
of officers
(a) To set the tone of good governance
from the top. NSSLA officers shall promote
the good governance practices within the
NSSLA by ensuring that policies on
governance as approved by the board of
trustees are consistently adopted across the
NSSLA.
(b) To oversee the day-to-day
management of the NSSLA. NSSLA officers
shall ensure that NSSLA‘s activities and
operations are consistent with the NSSLA’s
strategic objectives, risk strategy, corporate
values and policies as approved by the board
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of trustees. They shall establish a NSSLAwide management system characterized by
strategically aligned and mutually
reinforcing performance standards across
the organization.
(c) To ensure that duties are effectively
delegated to the staff and to establish a
management structure that promotes
accountability and transparency. NSSLA
officers shall establish measurable
standards, initiatives and specific
responsibilities and accountabilities for
each NSSLA personnel. NSSLA officers shall
oversee the performance of these delegated
duties and responsibilities and shall
ultimately be responsible to the board of
trustees for the performance of the NSSLA.
(d) To promote and strengthen checks
and balances systems in the NSSLA. NSSLA
officers shall promote sound internal
controls and avoid activities that shall
compromise the effective dispensing of their
functions. Further, they shall ensure that
they give due recognition to the importance
of the internal audit, compliance and
external audit functions.
(Circular Nos.757 dated 08 May 2012 and 749 dated 27 February
2012)
Sec. 4143S Disqualification of Trustees and
Officers. The following regulations shall
govern the disqualification of NSSLAs’
trustees and officers.
§ 4143S.1 Persons disqualified to
become trustees. Without prejudice to
specific provisions of law prescribing
disqualifications for trustees, the following
are disqualified from becoming trustees:
a. Permanently disqualified. Trustees/
officers/employees permanently disqualified
by the Monetary Board from holding a
director/trustee position:
(1) Persons who have been convicted
by final judgment of a court for offenses
involving dishonesty or breach of trust such
as but not limited to, estafa, embezzlement,
Manual of Regulations for Non-Bank Financial Institutions
§ 4143S.1
12.12.31
extortion, forgery, malversation, swindling,
theft, robbery, falsification, bribery, violation
of B.P. Blg. 22, violation of Anti- Graft and
Corrupt Practices Act and prohibited acts
and transactions under Section 7 of
R.A. No. 6713 (Code of Conduct and Ethical
Standards for Public Officials and
Employees);
(2) Persons who have been convicted
by final judgment of a court sentencing them
to serve a maximum term of imprisonment
of more than six (6) years;
(3) Persons who have been convicted
by final judgment of the court for violation
of banking/quasi-banking/NSSLA laws,
rules and regulations;
(4) Persons who have been judicially
declared insolvent, spendthrift or
incapacitated to contract;
(5) Trustees, officers or employees of
closed banks/QBs/trust entities who were
found to be culpable for such institution’s
closure as determined by the Monetary
Board;
(6) Trustees and officers of banks, QBs
and trust entities found by the Monetary
Board as administratively liable for violation
of banking laws, rules and regulations
where a penalty of removal from office is
imposed, and which finding of the Monetary
Board has become final and executory; or
(7) Trustees and officers of banks, QBs
and trust entities or any person found by
the Monetary Board to be unfit for the
position of trustees or officers because they
were found administratively liable by
another government agency for violation of
banking laws, rules and regulations or any
offense/violation involving dishonesty or
breach of trust, and which finding of said
government agency has become final and
executory.
b. Temporarily disqualified. Trustees/
officers/employees disqualified by the
Monetary Board from holding a trustee
position for a specific/indefinite period of
time. Included are:
(1) Persons who refuse to fully disclose
the extent of their business interest or any
material information to the appropriate
department of the SES when required
pursuant to a provision of law or of a circular,
memorandum, rule or regulation of the
Bangko Sentral. This disqualification shall
be in effect as long as the refusal persists;
(2) Trustees who have been absent or
who have not participated for whatever
reasons in more than fifty percent (50%) of
all meetings, both regular and special, of the
board of trustees during their incumbency,
and trustees who failed to physically attend
for whatever reasons in at least twenty-five
percent (25%) of all board meetings in any
year, except that when a notarized
certification executed by the corporate
secretary has been submitted attesting that
said trustees were given the agenda materials
prior to the meeting and that their
comments/decisions thereon were
submitted for deliberation/discussion and
were taken up in the actual board meeting,
said trustees shall be considered present in
the board meeting. This disqualification
applies only for purposes of the immediately
succeeding election;
(3) Persons who are delinquent in the
payment of their obligations as defined
hereunder:
(a) Delinquency in the payment of
obligations means that an obligation of a
person with an NSSLA where he/she is a
trustee or officer, or at least two (2)
obligations with other banks/FIs, under
different credit lines or loan contracts, are
past due pursuant to existing regulations;
(b) Obligations shall include all
borrowings from a bank/QB/trust entity/
NSSLA/other FIs obtained by:
(i) A trustee or officer for his own
account or as the representative or agent of
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§ 4143S.1
12.12.31
others or where he/she acts as a guarantor,
endorser or surety for loans from such FIs;
(ii) The spouse or child under the
parental authority of the trustee or officer;
(iii) Any person whose borrowings or
loan proceeds were credited to the account
of, or used for the benefit of a trustee or officer;
(iv) A partnership of which a trustee or
officer, or his/her spouse is the managing
partner or a general partner owning a
controlling interest in the partnership; and
(v) A corporation, association or firm
wholly-owned or majority of the capital of
which is owned by any or a group of persons
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§ 4143S.1
08.12.31
mentioned in the foregoing Items “(i)”, “(ii)”
and “(iv)”;
This disqualification shall be in effect
as long as the delinquency persists.
(4) Persons who have been convicted
by a court for offenses involving dishonesty
or breach of trust such as, but not limited
to, estafa, embezzlement, extortion, forgery,
malversation, swindling, theft, robbery,
falsification, bribery, violation of B.P. Blg.
22, violation of Anti-Graft and Corrupt
Practices Act and prohibited acts and
transactions under Section 7 of R.A. No.
6713 (Code of Conduct and Ethical
Standards for Public Officials and
Employees), violation of banking laws, rules
and regulations or those sentenced to serve
a maximum term of imprisonment of more
than six (6) years but whose conviction has
not yet become final and executory;
(5) Trustees and officers of closed
banks QBs/trust entities/NSSLAs and other
FIs under BSP supervision/regulation
pending their clearance by the Monetary
Board;
(6) Trustees disqualified for failure to
observe/discharge their duties and
responsibilities prescribed under existing
regulations. This disqualification applies
until the lapse of the specific period of
disqualification or upon approval by the
Monetary Board on recommendation by the
appropriate department of the SES of such
trustees’ election/re-election;
(7) Trustees who failed to attend the
special seminar on corporate governance
for board of trustees required by BSP. This
disqualification applies until the trustee
concerned had attended such seminar;
(8) Persons dismissed/terminated from
employment for cause. This disqualification
shall be in effect until they have cleared
themselves of involvement in the alleged
irregularity or upon clearance, on their
request, from the Monetary Board after
showing good and justifiable reasons, or
after the lapse of five (5) years from the time
they were officially advised by the
appropriate department of the SES of their
disqualification;
(9) Those under preventive suspension;
(10) Persons with derogatory records as
certified by, or on the official files of, the
judiciary, NBI, PNP, quasi-judicial bodies,
other government agencies, international
police, monetary authorities and similar
agencies or authorities of foreign countries
for irregularities or violations of any law,
rules and regulations that would adversely
affect the integrity of the trustee/officer or
the ability to effectively discharge his duties.
This disqualification applies until they have
cleared themselves of the alleged
irregularities/violations or after a lapse of five
(5) years from the time the complaint, which
was the basis of the derogatory record, was
initiated;
(11) Trustees and officers of banks, QBs
and trust entities found by the Monetary
Board as administratively liable for violation
of banking laws, rules and regulations
where a penalty of removal from office is
imposed, and which finding of the Monetary
Board is pending appeal before the appellate
court, unless execution or enforcement
thereof is restrained by the court;
(12) Trustees and officers of banks, QBs
and trust entities or any person found by
the Monetary Board to be unfit for the
position of trustees or officers because they
were found administratively liable by
another government agency for violation of
banking laws, rules and regulations or any
offense violation involving dishonesty or
breach of trust, and which finding of said
government agency is pending appeal before
the appellate court, unless execution or
enforcement thereof is restrained by the
court; and
(13) Trustees and officers of banks, QBs
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§§ 4143S.1 - 4143S.3
10.12.31
and trust entities found by the Monetary
Board as administratively liable for violation
of banking laws, rules and regulations
where a penalty of suspension from office
or fine is imposed, regardless whether the
finding of the Monetary Board is final and
executory or pending appeal before the
appellate court, unless execution or
enforcement thereof is restrained by the
court. The disqualification shall be in effect
during the period of suspension or so long
as the fine is not fully paid.
(As amended by Circular Nos. 584 dated 28 September 2007
and 513 dated 10 February 2006)
§ 4143S.2 Persons disqualified to
become officers
a. The disqualifications for trustees
mentioned in Subsec. 4143S.1 shall likewise
apply to officers, except those stated in Items
“b(2)” and “b(7)”.
b. The spouses or relatives within the
second degree of consanguinity or affinity
are prohibited from holding officership
positions across the following functional
categories within an NSSLA:
1. Decision making and senior
management function, e.g., chairman,
president, chief executive officer (CEO),
chief operating officer (COO), general
manager, and chief financial officer (CFO)
other than the treasurer or controller;
2. Treasury function, e.g., Treasurer and
Vice President – Treasury;
3. Recordkeeping and financial
reporting functions, e.g., controller and chief
accountant;
4. Safekeeping of assets, e.g., chief
cashier;
5. Risk management function, e.g., chief
risk officer;
6. Compliance function, e.g.,
compliance officer; and
7. Internal audit function, e.g., internal
auditor.
S Regulations
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The spouse or relative within the second
degree of consanguinity or affinity of any
person holding the position of manager,
cashier, or accountant of a branch or
extension office of an NSSLA or their
respective equivalent positions is
disqualified from holding or being
appointed to any of said positions in the
same branch or extension office.
c. Except as may otherwise be allowed
under C.A. No. 108, otherwise known as
“The Anti-Dummy Law,” as amended,
foreigners cannot be officers or employees
of NSSLAs; and
d. Any appointive or elective public
official, whether full time or part time,
except in cases where such service is
incident to financial assistance provided by
the government or GOCCs or in cases
allowed under existing law.
(As amended by Circular No. 699 dated 17 November 2010)
§ 4143S.3 Disqualification procedures
a. The board of trustees and
management of every NSSLAs shall be
responsible for determining the existence
of the ground for disqualification of the
NSSLA’s trustee/officer or employee and for
reporting the same to the BSP. While the
concerned NSSLA may conduct its own
investigation and impose appropriate
sanction/s as are allowable, this shall be
without prejudice to the authority of the
Monetary Board to disqualify a trustee/
officer/employee from being elected
appointed as trustee/officer in any FI under
the supervision of the BSP. Grounds for
disqualification made known to the NSSLA
shall be reported to the appropriate
department of the SES within seventy-two
(72) hours from knowledge thereof.
b. On the basis of knowledge and
evidence on the existence of any of the
grounds for disqualification mentioned in
Subsecs. 4143S.1 and 4143S.2, the trustee
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08.12.31
or officer concerned shall be notified in
writing either by personal service or
through registered mail with registry return
receipt card at his/her last known address
by the appropriate department of the SES of
the existence of the ground for his/her
disqualification and shall be allowed to
submit within fifteen (15) calendar days from
receipt of such notice an explanation on
why he/she should not be disqualified and
included in the watchlisted file, together
with the evidence in support of his/her
position. The head of said department may
allow an extension on meritorious ground.
c. Upon receipt of the reply/
explanation of the trustee/officer
concerned, the appropriate department of
the SES shall proceed to evaluate the case.
The trustee/officer concerned shall be
afforded the opportunity to defend/clear
himself/herself.
d. If no reply has been received from
the trustee/officer concerned upon the
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§ 4143S.3
08.12.31
expiration of the period prescribed under
Item “b” above, said failure to reply shall
be deemed a waiver and the appropriate
department of the SES shall proceed to
evaluate the case based on available
records/evidence.
e. If the ground for disqualification is
delinquency in the payment of obligation,
the concerned trustee or officer shall be
given a period of thirty (30) calendar days
within which to settle said obligation or,
restore it to its current status or, to explain
why he/she should not be disqualified and
included in the watchlisted file, before the
evaluation on his disqualification and
watchlisting is elevated to the Monetary
Board.
f. For trustees/officers of closed QBs,
trust entities, NSSLAs or other FIs under
Bangko Sentral supervision, the concerned
department of the SES shall make
appropriate recommendation to the
Monetary Board clearing said trustees/
officers when there is no pending case/
complaint or evidence against them. When
there is evidence that a trustees/officer has
committed irregularity, the appropriate
department of the SES shall make
recommendation to the Monetary Board
that his/her case be referred to the OSI for
further investigation and that he/she be
included in the masterlist of temporarily
disqualified persons until the final
resolution of his/her case. Trustees/officers
with pending cases/complaints shall also be
included in said masterlist of temporarily
disqualified persons upon approval by the
Monetary Board until the final resolution of
their cases. If the trustee/officer is cleared
from involvement in any irregularity, the
appropriate department of the SES shall
recommend to the Monetary Board his/her
delisting. On the other hand, if the trustee
officer concerned is found to be responsible
for the closure of the institution, the
concerned department of the SES shall
recommend to the Monetary Board his/her
delisting from the masterlist of temporarily
disqualified persons and his/her inclusion
in the masterlist of permanently disqualified
persons.
g. If the disqualification is based on
dismissal from employment for cause, the
appropriate department of the SES shall, as
much as practicable, endeavor to establish
the specific acts or omissions constituting
the offense or the ultimate facts which
resulted in the dismissal to be able to
determine if the disqualification of the
trustee/officer concerned is warranted or not.
The evaluation of the case shall be made
for the purpose of determining if
disqualification would be appropriate and
not for the purpose of passing judgment on
the findings and decision of the entity
concerned. The appropriate department of
the SES may decide to recommend to the
Monetary Board a penalty lower than
disqualification (e.g., reprimand,
suspension, etc.) if, in its judgment the act
committed or omitted by the trustee/officer
concerned
does
not
warrant
disqualification.
h. All other cases of disqualification,
whether permanent or temporary shall be
elevated to the Monetary Board for approval
and shall be subject to the procedures
provided in paragraphs “a”, “b”, “c” and “d”
above.
i. Upon approval by the Monetary
Board, the concerned trustee/officer shall be
informed by the appropriate department of the
SES in writing either by personal service or
through registered mail with registry return
receipt card, at his/her last known address of
his/her disqualification from being elected/
appointed as trustee/officer in any FI under the
supervision of Bangko Sentral and/or of his/
her inclusion in the masterlist of watchlisted
persons so disqualified.
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§§ 4143S.3 - 4143S.6
12.12.31
j. The board of trustees of the
concerned institution shall be
immediately informed of cases of
disqualification approved by the Monetary
Board and shall be directed to act thereon
not later than the following board meeting.
Within seventy-two (72) hours thereafter,
the corporate secretary shall report to the
Governor of the Bangko Sentral through
the appropriate department of the SES the
action taken by the board on the trustee/
officer involved.
k. Persons who are elected or
appointed as trustee or officer in any of the
Bangko Sentral supervised institutions for the
first time but are subject to any of the
grounds for disqualification provided for
under Subsecs. 4143S.1 and 4143S.2, shall
be afforded the procedural due process
prescribed above.
l. Whenever a trustee/officer is cleared
in the process mentioned under Item “c”
above or, when the ground for
disqualification ceases to exist, he/she would
be eligible to become trustee or officer of
any bank, QB, trust entity or any institution
under the supervision of the Bangko Sentral
only upon prior approval by the Monetary
Board. It shall be the responsibility of the
appropriate department of the SES to elevate
to the Monetary Board the lifting of the
disqualification of the concerned trustee/
officer and his/her delisting from the
masterlist of watchlisted persons.
(As amended by Circular No. 584 dated 28 September 2007)
§ 4143S.4 Effect of non-possession of
qualifications or possession of
disqualifications. Trustees/officers elected
or appointed without possessing the
qualifications in Subsecs. 4141S.2/4142S.2
or possessing any of the disqualifications as
enumerated in Subsecs.4143S.1/4143S.2,
shall vacate their respective positions
immediately.
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§ 4143S.5 (Reserved)
§ 4143S.6 Watchlisting. To provide the
Bangko Sentral with a central information
file to be used as reference in passing upon
and reviewing the qualifications of persons
elected or appointed as trustee or officer of
an NSSLA, the SES shall maintain a watchlist
of disqualified NSSLA trustees/officers under
the following procedures:
a. Watchlist categories. Watchlisting
shall be categorized as follows:
(1) Disqualification
File
“A”
(Permanent)
-Trustees/officers/employees
permanently disqualified by the Monetary
Board from holding a trustee/officer position
in any institution under the supervision/
regulation of Bangko Sentral.
(2) Disqualification
File
“B”
(Temporary)
-Trustees/officers/employees
temporarily disqualified by the Monetary
Board from holding a trustee/officer position
in any institution under the supervision/
regulation of Bangko Sentral.
b. Inclusion of trustees/officers/
employees in the watchlist. Upon
recommendation by the appropriate
department of the SES, the inclusion of
trustees/officers/employees in watchlist
disqualification files “A” and “B” on the
basis of decisions, actions or reports of the
courts, banks, QBs, other NSSLAs and FIs
under Bangko Sentral supervision, Bangko
Sentral, NBI or any other administrative
agencies shall first be approved by the
Monetary Board.
c. Notification of trustees/officers/
employees. Upon approval by the Monetary
Board, the concerned trustee/officer/
employee shall be informed through
registered mail, with registry return receipt
card at his/her last known address of his/
her inclusion in the masterlist of watchlisted
Manual of Regulations for Non-Bank Financial Institutions
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12.12.31
persons disqualified to be a trustee/officer
in any FI under the supervision of the
Bangko Sentral.
d. Confidentiality. Watchlist files shall
be for internal use only of the Bangko Sentral
and may not be accessed or queried upon
by outside parties including banks, QBs,
trust corporations, NSSLAs, and such
institutions under the supervisory and
regulatory powers of the Bangko Sentral
except with the authority of the person
concerned (without prejudice to the
authority of the Governor and the Monetary
Board to authorize release of the
information) and with the approval of the
concerned SES Department Head or SES
Subsector Head or the Deputy Governor,
SES or the Governor, or the Monetary Board.
The Bangko Sentral will disclose
information on the person included in its
watchlist files only upon submission of a
duly notarized authorization from the
concerned person and approval of such
request by the concerned SES Department
Head or SES Subsector Head or the Deputy
Governor, SES or the Governor or the
Monetary Board. The prescribed
authorization form to be submitted to the
appropriate department of the SES is in
Appendix Q-45.
NSSLAs can gain access to said
information in the said watchlist for the
sole purpose of screening their nominees/
applicants for trustees/officers and/or
confirming their elected trustees and
appointed officers. NSSLAs must obtain
the said authorization on an individual
basis.
e. Delisting. All delistings shall be
approved by the Monetary Board upon
recommendation of the appropriate
department of the SES except in cases of
persons known to be dead, where
delisting shall be automatic upon proof
of death and need not be elevated to the
Monetary Board. Delisting may be
approved by the Monetary Board in the
following cases:
(1) Watchlist – Disqualification File “B”
(Temporary) –
(a) After the lapse of the specific period
of disqualification;
(b) When the conviction by the court
for crimes involving dishonesty, breach of
trust and/or violation of banking laws
becomes final and executory, in which case
the trustee/officer/employee is relisted to
Watchlist – Disqualification File “A”
(Permanent);
(c) Upon favorable decision or
clearance by the appropriate body, i.e.,
court, NBI, bank, QB, trust entity or such
other agency/body where the concerned
individual had derogatory record. Trustees/
officers/employees delisted from the
Watchlist – Disqualification File “B” other
than those upgraded to Watchlist –
Disqualification File “A” shall be eligible for
re-employment with any bank, QB, trust
entity, NSSLA or other FI under Bangko
Sentral supervision.
(As amended by Circular No. 758 dated 11 May 2012, CL-2007001 dated 04 January 2007 and CL-2006-046 dated 21 December
2006)
Sec. 4144S Compensation of Trustees,
Officers and Employees. No trustee, officer
or employee of an NSSLA shall receive from
such NSSLA and no NSSLA shall pay to any
trustee, officer, or employee of such NSSLA,
any commission, emolument, gratuity or
reward based on the volume or number of
loans made, or based on the interest or fees
collected thereon. Nothing in this Section,
however, prohibits or limits any of the
following:
a. Receipt or payment of salaries of
trustees, officers and employees;
b. Receipt or payment of commissions
to agents whether or not based on the
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§§ 4144S - 4146S
08.12.31
volume or number of loans or on the
interest and fees collected thereon; or
c. Receipt or payment of bonuses of
trustees, officers or employees if such
bonuses are based on the profits and not
on the volume or number of loans made
or on the interest or fees collected thereon.
To protect the funds of depositors and
creditors, the Monetary Board may
regulate/restrict the payment by the NSSLA
of compensation, allowances, fees,
bonuses, and fringe benefits to its trustees
and officers in exceptional cases and
when the circumstances warrant, such as,
but not limited to the following:
a. When the NSSLA is found by the
Monetary Board to be conducting business
in an unsafe or unsound manner;
b. When the NSSLA is found by the
Monetary Board to be in an unsatisfactory
financial condition such as, but not limited
to, the following cases:
(1) Its capital is impaired; and
(2) It has suffered continuous losses from
operations for the past three (3) years.
In the presence of any one (1) or more
of the circumstances mentioned above, the
Monetary Board may impose the following
restrictions in the compensation and other
benefits of trustees and officers:
(a) Except for the financial assistance to
meet expenses for the medical, maternity,
education and other emergency needs of the
trustees or officers or their immediate family,
other forms of financial assistance may be
suspended.
(b) When the total compensation
package including salaries, allowances, fees
and bonuses of trustees and officers are
significantly excessive as compared with
industry averages, the Monetary Board may
order their reduction to reasonable levels.
§ 4144S.1 Compensation increases.All
increases in compensation, in any form, of
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Part I - Page 16
all trustees and trustee-officers in excess of
ten percent (10%) thereof per annum shall
require the approval of the Bangko Sentral.
§ 4144S.2 Liability for loans contrary
to law. No NSSLA shall make or purchase
any loan or investment not authorized or
permitted under R.A. No. 8367, and any
trustee, officer or employee, who on
behalf of any such NSSLA, knowingly
makes or purchases any such loan or
investment or who knowingly consents
thereto shall be personally liable to the
NSSLA for the full amount of any such
loan or investment.
Sec. 4145S Bonding of Officers and
Employees. All officers and employees of
an NSSLA who, in the regular discharge
of their duties have access to money or
negotiable securities shall, before entering
upon such duties, furnish to the
employing NSSLA a good and sufficient
bond and providing for indemnity to the
NSSLA against the loss of money or
securities, by reason of their dishonesty.
The bond of the cashier, assistant cashier,
treasurer, and other employees having
money accountability shall not be less
than their average daily accountability.
The bond must be issued by a reputable
bonding company duly licensed by the
Insurance Commission and approved by
the Bangko Sentral. Capital contribution
or a cash bond deposited with the NSSLA
or with a bank, may also be allowed.
Sec. 4146S Agents and Representatives
No person shall act as an agent or sales
representative of an NSSLA or operate an
agency without obtaining a license from
the Monetary Board. No license is
required for a collector of an NSSLA but
no person shall hold himself out or act as
collector unless he is authorized as a
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§§ 4146S - 4151S.1
12.12.31
collector in writing by such NSSLA.
Sec. 4147S Bio-data of Trustees and
Officers
a. NSSLAs shall submit to the
appropriate department of the SES a biodata with ID picture of their trustees/
officers with rank of senior vice president
(SVP) and above (or equivalent ranks)
upon every election/re-election/
appointment/promotion in a prescribed
form and for first-time trustees/officers
with rank of SVP and above (or equivalent
ranks) within a particular NSSLA, the duly
notarized authorization form per
Appendix Q-45, within ten (10) business
days from the date of election/re-election
of the trustees/meeting of the board of
trustees in which the officers are
appointed/promoted in accordance with
Appendix S-2.
The bio-data shall be updated and
submitted in case of change of name due
to change in civil status, within ten (10)
business days from the date the change
occurred.
For other officers below the rank of
SVP, the NSSLA shall not be required to
submit their bio-data to the Bangko
Sentral.
b. The NSSLA shall, however, keep
a complete record of the bio-data of all
its trustees and officers and shall maintain
a system of updating said records which
shall be made available during on-site
examination or when required by the
Bangko Sentral for submission for offsite
verification.
c. The NSSLA shall also submit to the
appropriate department of the SES a duly
notarized list of the incumbent members
of the board of trustees and officers
(President or equivalent rank, down the
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Part I - Page 16a
line, format attached as Appendix Q-57b),
within ten (10) business days from the
election of the board of trustees as
provided in the NSSLA’s by-laws, in
accordance with Appendix S-2.
(As amended by Circular No. 758 dated 11 May 2012)
Sec. 4148S Full-Time Manager for NSSLAs
NSSLAs with total assets of at least
P5.0 million shall maintain a full-time
manager to take charge of the operations
of the NSSLA. The manager shall possess
all the qualifications and shall not have any
disqualification under Subsecs. 4142S.2 and
4143S.2, respectively.
Secs. 4149S - 4150S (Reserved)
H. BRANCHES AND OTHER OFFICES
Sec. 4151S Establishment of Branches/
Extension Offices. Prior Bangko Sentral
authority shall be obtained before operating
a branch or other offices.
§ 4151S.1 Application.The application
shall be prescribed by the appropriate
department of the SES and accompanied by
the following minimum requirements:
a. Sketch of the location of the
proposed office which shall be within the
compound of the mother firm’s branch office;
b. Itemized statement of estimated
receipts and expenses of the NSSLA in
connection with such branch or extension
office;
c. Description or enumeration of
service facilities that will cater to the
deposit and credit needs of members of
the NSSLA;
d. Financial statements for the year
immediately preceding the date of
application;
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§§ 4151S.1 - 4161S.2
08.12.31
e. Certification as to the actual
number of members that will be serviced
by the branch/extension office; and
f. Undertaking that the branch/
extension office will service only members
of the NSSLA.
§ 4151S.2 Conditions precluding
acceptance/processing of application. The
application shall not be accepted/processed
in any of the following cases:
a. The NSSLA’s operation during the
year immediately preceding the date of
filing of application was unprofitable;
b. Total capital accounts of the
NSSLA are less than P100 million as of
the date of filing of the application;
c. Total number of members to be
served in the proposed branch/extension
office is less than 500; or
d. Non-compliance by the NSSLA
with any of the pertinent provisions of
banking laws, rules, regulations and
policies of the BSP.
§ 4151S.3 Internal control system. The
NSSLA shall submit to the appropriate
department of the SES a system of internal
safeguards and control measures to be
adopted for compliance by the staff of the
proposed branch/extension office.
§ 4151S.4 Permit to operate. Actual
operation shall commence only after a
permit to operate has been issued by the
BSP.
Secs. 4152S - 4155S (Reserved)
except when extraordinary instances
caused by unforeseen, unavoidable event
directly affect the NSSLA’s ability to open
for business. NSSLAs shall post
conspicuously at all times in their place of
business their schedule of regular business
hours and days.
Secs. 4157S - 4160S (Reserved)
J. REPORTS
Sec. 4161S Records. NSSLAs shall have a
true and accurate account, record or
statement of their daily transactions. The
making of any false entry or the willful
omission of entries relevant to any
transaction is a ground for the Monetary
Board for the imposition of administrative
sanctions under Section 37 of R.A.
No. 7653, without prejudice to the criminal
liability of the director or officer responsible
therefore under Sections 35 and 36 of R.A.
No. 7653 and/or the applicable provisions
of the Revised Penal Code. Records shall
be up to-date and shall contain sufficient
detail so that an audit trail is established.
§ 4161S.1 Uniform System of
Accounts. NSSLAs are required to pattern
their charts of accounts and recording
systems after the Uniform System of
Accounts prescribed for NSSLAs including
reportorial and publication requirements.
The voucher system of accounting or the
ticket system, or such other accounting
system acceptable to the BSP as well as
the prescribed chart of accounts shall be
adopted for use by NSSLAs.
I. BUSINESS DAYS AND HOURS
Sec. 4156S Business Days and Hours
NSSLAs may, with the prior approval of the
appropriate department of the SES, adopt
such business days and hours as may be
convenient for them. NSSLAs shall be open
for business during business hours and days
§ 4161S.2 Philippine Financial
Reporting Standards/Philippine Accounting
Standards
Statement of policy. It is the policy of
the Bangko Sentral to promote fairness,
transparency and accuracy in financial
reporting. It is in this light that the BSP aims
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§§ 4161S.2 - 4162S.1
08.12.31
to adopt all PFRS and PAS issued by the
ASC to the greatest extent possible.
NSSLAs shall adopt the PFRS and PAS
which are in accordance with GAAP in
recording transactions and in the
preparation of financial statements and
reports to BSP. However, in cases where
there are differences between BSP
regulations and PFRS/PAS as when more
than one (1) option are allowed or certain
maximum or minimum limits are
prescribed by the PFRS/PAS, the option or
limit prescribed by BSP regulations shall
be adopted by all NSSLA/FIs.
For purposes hereof, the PFRS/PAS
shall refer to issuances of the ASC and
approved by the PRC.
Accounting treatment for prudential
reporting. For prudential reporting, FIs shall
adopt in all respect the PFRS and PAS
except as follows:
a. In preparing consolidated financial
statements, only investments in financial
allied subsidiaries except insurance
subsidiaries shall be consolidated on a lineby-line basis; while insurance and nonfinancial allied subsidiaries shall be
accounted for using the equity method.
Financial/non-financial allied/non-allied
associates shall be accounted for using the
equity method in accordance with the
provisions of PAS 28 “Investments in
Associates”;
b. For purposes of preparing separate
financial statements, financial/non-financial
allied/non-allied subsidiaries/associates,
including insurance subsidiaries/associates,
shall also be accounted for using the equity
method; and
c. FIs shall be required to meet the
BSP recommended valuation reserves.
Government grants extended in the form
of loans bearing nil or low interest rates shall
be measured upon initial recognition at its
fair value (i.e., the present value of the
future cash flows of the financial instrument
discounted using the market interest rate).
S Regulations
Part I - Page 18
The difference between the fair value and
the net proceeds of the loan shall be
recorded under “Unearned IncomeOthers”, which shall be amortized over the
term of the loan using the effective interest
method.
The provisions on government grants
shall be applied retroactively to all
outstanding government grants received.
NSSLAs that adopted an accounting
treatment other than the foregoing shall
consider the adjustment as a change in
accounting policy, which shall be
accounted for in accordance with PAS 8.
Notwithstanding the exceptions in
Items “a”, “b” and “c”, the audited annual
financial statements required to be
submitted to the BSP in accordance with
Appendix S-2 shall in all respect be PFRS/
PAS compliant: Provided, That FIs shall
submit to the BSP adjusting entries
reconciling the balances in the financial
statements for prudential reporting with
that in the audited annual financial
statements.
(As amended by Circular No. 572 dated 22 June 2007)
Sec. 4162S Reports. NSSLAs shall submit
to the appropriate department of the SES
the reports in prescribed form listed in
Appendix S-2.
§ 4162S.1 Categories and signatories
of reports. For purposes of designating the
signatories of reports, certain weekly,
monthly, quarterly, semi-annual, and annual
statements/reports required to be submitted
to the BSP are hereby grouped into Category
A-1, A-2, A-3 and Category B, as enumerated
in Appendix S-3.
Category A-1 reports shall be signed by
the NSSLA’s chief executive officer (who
may be the president or chairman of the
board, or designated in the by-laws), or in
his absence, by the executive vice president
or the officer duly authorized under a
resolution approved by the board of
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§§ 4162S.1 - 4162S.3
08.12.31
trustees and by the chief finance officer
(i.e., controller or chief accountant, who
shall likewise be duly authorized by the
NSSLA’s board of trustees in a format
prescribed in Appendix S-3a.
Category A-2 reports of the head office
of the NSSLA shall be signed by the
NSSLA’s president or senior vicepresident/equivalent position. Offices/units
(such as branch) reports in this category
shall be signed by their respective
managers/officers-in-charge. Likewise, the
signing authority in this category shall be
contained in a resolution approved by the
board of trustees in the format prescribed
in Appendix S-3b.
Category A-3 and B reports are those
required to be submitted to the BSP and are
not included in Categories A-1 and A-2. They
shall be signed by officers or their alternates,
who shall be duly designated by the board of
trustees. A copy of the board resolution with
format as prescribed in Appendix S-3c,
covering the initial designation and subsequent
changes in signatories and alternates, shall be
submitted to the appropriate department of
the SES within three (3) days from the date of
resolution.
If a report is submitted to the BSP under
the signature of an officer who is not listed
or included in any of the resolutions
mentioned above, the appropriate
department of the SES shall refuse to
acknowledge the report as valid or consider
the report as not having been submitted at
all. If such a report is not resubmitted by the
NSSLA under the signature of a duly
authorized signing officer, administrative
sanctions/penalties shall be imposed on the
erring NSSLA for the late reporting or failure
to submit the required report, as the case
may be.
§ 4162S.2 Manner of filing. The
submission of the reports shall be effected
by filing them personally with the
appropriate department of the SES or with
the BSP Regional Offices or by sending
them registered mail or special delivery,
unless otherwise specified in the circular
or memorandum of the Monetary Board or
the BSP.
§ 4162S.3 Sanctions and procedures for
filing and payment of fines. Failure to submit
the above reports on or before the specified
dates shall subject the person responsible
or entity concerned to the penalties provided
by law.
For willful delay in the submission of
reports, the following rules shall apply:
a. Definition of Terms. The following
definitions shall apply:
(1) Report shall refer to all written
reports/statements required of an NSSLA
to be submitted to the BSP periodically or
within a specified period.
(2) Willful delay in the submission of
reports shall refer to the failure of any
NSSLA to submit on time the report defined
in Item “(1)” above. Failure to submit a
report on time due to fortuitous events, such
as fire and other natural calamities and
public disorders, shall not be considered as
willful delay.
(3) Examination shall include, but need not
be limited to, the verification, review, audit,
investigation and inspection of the books and
records, business affairs, administration and
financial condition of any NSSLA including the
reproduction of the records as well as the
taking possession of the books and records and
keeping them under BSP custody after giving
proper receipts therefore. It shall also include
the interview of the directors and personnel
of any NSSLA.
(4) Refusal to permit examination shall
mean any act or omission which impedes,
delays or obstructs the duly authorized BSP
officer/examiner/employee from conducting
an examination, including the act of refusing
to honor a letter of authority to examine
presented by any officer/examiner/
employee of the BSP.
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§ 4162S.3
08.12.31
b. Fines for willful delay in
submission of reports. NSSLAs incurring
willful delay in the submission of required
reports shall pay a fine in accordance with
the following schedule:
(1) For Categories A-1, A-2 and A-3 reports
Per day of default
until the report is filed
P180
(2) For Category B reports
Per day of default
until the report is filed
60
Delay or default shall start to run on the
day following the last day required for the
submission of reports. However, should the
last day of filing fall on a non-working day
in the locality where the reporting NSSLA
is situated, delay or default shall start to run
on the day following the next working day.
The due date/deadline for submission of
reports to BSP as prescribed under Sec.
4162S governing the frequency and
deadlines indicated in Appendix S-2 shall
be automatically moved to the next
business day whenever a half-day
suspension of business operations in
government offices is declared due to an
emergency such as typhoon, floods, etc.
For the purpose of establishing delay or
default, the date of acknowledgment by the
appropriate department of the SES or the BSP
Regional Offices/Units appearing on the
copies of such reports filed or submitted or
the date of mailing postmarked on the
envelope/the date of registry or special
delivery receipt, as the case may be, shall
be considered as the date of filing.
Delayed schedules/attachments and
amendments shall be considered late
reporting subject to above penalties.
c. Sanctions for willful refusal to permit
examination/making of false statement
(1) Any NSSLA which shall willfully
refuse to permit examination shall pay a fine
of P3,000 daily from the day of refusal and
for as long as such refusal lasts.
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Part I - Page 20
The provisions of Section 34 of R. A.
No. 7653 shall apply to any agent,
manager, or other officer-in-charge of any
NSSLA who willfully refuses any lawful
examination into the affairs of such NSSLA.
The willful making of a false statement
or misleading statement on a material fact
to department of the BSP charged with the
regulation of NSSLAs or to his examiner
shall be punished in accordance with
Section 36 of R. A. No. 7653.
(2) Procedures in imposing the fine
(a) The BSP officer/examiner/employee
shall report the refusal of the NSSLA to
permit examination to the head of the
appropriate department of BSP, who shall
forthwith make a written demand upon the
NSSLA concerned for such examination.
If the NSSLA continues to refuse said
examination without any satisfactory
explanation therefor, the BSP officer/
examiner/employee concerned shall
submit a report to that effect to the
appropriate department head.
(b) The fine shall be imposed starting
on the day following the receipt by the
appropriate department of the written
report submitted by the BSP officer/
examiner/employee concerned regarding
the continued refusal of the NSSLA to
permit the desired examination.
d. Manner of payment or collection
of fines. The regulations embodied in Sec.
4601S shall be observed in the collection of
the fines from NSSLAs.
e. Appeal to the Monetary Board.
NSSLAs may appeal to the Monetary Board
a ruling of the appropriate department
imposing a fine.
f. Other penalties. The foregoing
penalties shall not preclude the application
of, or shall be without prejudice to, other
administrative sanctions as well as to the
filing of criminal case as provided for in
the other provisions of the law, as may be
warranted by the nature of the offense.
(As amended by Circular No. 585 dated 15 October 2007)
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§§ 4163S - 4164S.3
08.12.31
Sec. 4163S (Reserved)
Sec. 4164S Internal Audit Function
Internal audit is an independent, objective
assurance and consulting function established
to examine, evaluate and improve the
effectiveness of risk management, internal
control, and governance processes of an
organization.
§ 4164S.1 Status. The internal audit
function must be independent of the
activities audited and from day-to-day
internal control process. It must be free to
report audit results, findings, opinions,
appraisals and other information to the
appropriate level of management. It shall
have authority to directly access and
communicate with any officer or employee,
to examine any activity or entity of the
institution, as well as to access any records,
files or data whenever relevant to the
exercise of its assignment. The Audit
Committee or senior management should
take all necessary measures to provide the
appropriate resources and staffing that
would enable internal audit to achieve its
objectives.
§ 4164S.2 Scope. The scope of internal
audit shall include:
a. Examination and evaluation of the
adequacy and effectiveness of the internal
control systems;
b. Review of the application and
effectiveness of risk management
procedures and risk assessment
methodologies;
c Review of the management and
financial information systems, including the
electronic information system and electronic
banking services;
d. Assessment of the accuracy and
reliability of the accounting system and of
the resulting financial reports;
e. Review of the systems and
procedures of safeguarding assets;
f. Review of the system of assessing
capital in relation to the estimate of
organizational risk;
g. Transaction testing and assessment
of specific internal control procedures; and
h. Review of the compliance system
and the implementation of established
policies and procedures.
§ 4164S.3 Qualification standards of
the internal auditor. The internal auditor
of a UB or a KB must be a CPA and must
have at least five (5) years experience in
the regular audit (internal or external) of a
UB or KB as auditor-in-charge, senior
auditor or audit manager. He must possess
the knowledge, skills, and other
competencies to examine all areas in
which the institution operates. Professional
competence as well as continuing training
and education shall be required to face-up
to the increasing complexity and diversity
of the institution’s operations.
The internal auditor of a TB, QB, trust
entity or national Coop Bank must be a CPA
with at least five (5) years experience in
the regular audit (internal or external) of a
TB, QB, trust entity or national Coop Bank
as auditor-in-charge, senior auditor or audit
manager or, in lieu thereof, at least three (3)
years experience in the regular audit (internal
or external) of a UB or KB as auditor-in
charge, senior auditor or audit manager.
The internal auditor of an RB, NSSLA or
local Coop Bank must be at least an
Accounting graduate with two (2) years
experience in external audit or in the regular
audit of an RB, NSSLA or local Coop Bank
or, in lieu thereof, at least one (1) year
experience in the regular audit (internal or
external) of a UB, KB, TB, QB, trust entity
or national Coop Bank as auditor-in-charge,
senior auditor or audit manager.
A qualified internal auditor of a UB or a
KB shall be qualified to audit TBs, QBs, trust
entities, national cooperative banks, RBs,
NSSLAs, local cooperative banks,
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08.12.31
subsidiaries and affiliates engaged in allied
activities, and other FIs under BSP
supervision.
A qualified internal auditor of a TB or
national cooperative bank shall likewise be
qualified to audit QBs, trust entities, RBs,
NSSLAs, local cooperative banks,
subsidiaries and affiliates engaged in allied
activities, and other financial institutions
under BSP supervision.
§ 4164S.4 Code of Ethics and Internal
Auditing Standards. The internal auditor
should conform with the Code of
Professional Ethics for CPAs and ensure
compliance with sound internal auditing
standards, such as the Institute of Internal
Auditors’ International Standards for the
Professional Practice of Internal Auditing
(e-mail: standards@theiia.org; Web: http://
www.theiia.org.) and other supplemental
standards issued by regulatory authorities/
government agencies. The Standards address
independence and objectivity, professional
proficiency, scope of work, performance of
audit work, management of internal audit,
quality assurance reviews, communication
and monitoring of results.
Secs. 4165S - 4170S (Reserved)
K. INTERNAL CONTROL
Sec. 4171S External Auditor. NSSLAs except
those with total resources of P10.0 million
or less, shall engage the services of an
independent Certified Public Accountant to
audit their books of accounts at least once a
year, or as often as necessary.
Sec. 4172S Financial Audit. NSSLAs shall
cause an annual financial audit by an
external auditor acceptable to the BSP not
later than thirty (30) calendar days after the
close of the calendar year or the fiscal year
adopted by the NSSLA. Report of such audit
shall be submitted to the board of directors
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Part I - Page 22
and the appropriate department of the SES
not later than 120 calendar days after the
close of the calendar year or the fiscal year
adopted by the NSSLA. The report to the
BSP shall be accompanied by the:
(1) certification by the external auditor on
the: (a) dates of start and termination of
audit; (b) date of submission of the financial
audit report and certification under oath
stating that no material weakness or breach
in the internal control and risk
management systems was noted in the
course of the audit of the NSSLA to the
board of directors; and (c) the absence of
any direct or indirect financial interest and
other circumstances that may impair the
independence of the external auditor; (2)
reconciliation statement between the AFS
and the balance sheet and income
statement for NSSLA submitted to the BSP
including copies of adjusting entries on the
reconciling items; and (3) other information
that may be required by the BSP.
In addition, the external auditor shall
be required by the NSSLA to submit to the
board of directors, a LOC indicating any
material weakness or breach in the
institution’s internal control and risk
management systems within thirty (30)
calendar days after submission of the
financial audit report. If no material
weakness or breach is noted to warrant the
issuance of an LOC, a Certification under
oath stating that no material weakness or
breach in the internal control and risk
management systems was noted in the
course of the audit of the NSSLA shall be
submitted in its stead, together with the
financial audit report.
Material weakness shall be defined as a
significant control deficiency, or
combination of deficiencies, that results in
more than a remote likelihood that a material
misstatement of the financial statements will
not be detected or prevented by the entity’s
internal control. A material weakness does
not mean that a material misstatement has
Manual of Regulations for Non-Bank Financial Institutions
§ 4172S
08.12.31
occurred or will occur, but that it could
occur. A control deficiency exists when
the design or operation of a control does
not allow management or employees, in
the normal course of performing their
assigned functions, to prevent or detect
misstatements on a timely basis. A
significant deficiency is a control
deficiency, or combination of control
deficiencies, that adversely affects the
entity’s ability to initiate, authorize,
record, process, or report financial data
reliably in accordance with GAAP. The
term more than remote likelihood shall
mean that future events are likely to occur
or are reasonably possible to occur.
The board of directors, in a regular or
special meeting, shall consider and act on
the financial audit report and the
certification under oath submitted in lieu
of the LOC and shall submit, within thirty
(30) banking days after receipt of the
reports, a copy of its resolution to the
appropriate department of the SES. The
resolution shall show, among other
things, the actions(s) taken on the reports
and the names of the directors present and
absent.
The board shall likewise consider and
act on the LOC and shall submit, within
thirty (30) banking days after receipt
thereof, a copy of its resolution together
with said LOC to the appropriate
department of the SES. The resolution
shall show the action(s) taken on the
findings and recommendations and, the
names of the directors present and absent,
among other things.
The LOC shall be accompanied by the
certification of the external auditor of the
date of its submission to the board of
directors.
NSSLAs under Bangko Sentral
supervision which are under the
concurrent jurisdiction of the COA shall
be exempt from the aforementioned
annual financial audit by an acceptable
external auditor: Provided, That when
warranted by supervisory concern such as
material weakness/breach in internal
control and/or risk management systems,
the Monetary Board may, upon
recommendation of the appropriate
department of the SES, require the
financial audit to be conducted by an
external auditor acceptable to the Bangko
Sentral, at the expense of the institution
concerned: Provided further, That when
circumstances such as, but not limited to,
loans from multilateral financial institutions,
privatization, or public listing warrant, the
financial audit of the concerned institution
by an acceptable external auditor may also
be allowed.
NSSLAs under the concurrent
jurisdiction of the Bangko Sentral and COA
shall, however, submit a copy of the AAR
of the COA to the appropriate department
of the SES within thirty (30) banking days
after receipt of the report by the board of
directors. The AAR shall be accompanied
by the: (1) certification by the institution
concerned on the date of receipt of the AAR
by the board of directors; (2) reconciliation
statement between the AFS in the AAR and
the balance sheet and income statement of
the NSSLA submitted to the Bangko Sentral,
including copies of adjusting entries on the
reconciling items; and (3) other information
that may be required by the Bangko Sentral.
The board of directors of said
institutions, in a regular or special
meeting, shall consider and act on the
AAR, as well as on the comments and
observations and shall submit, within
thirty (30) banking days after receipt of the
report, a copy of its resolution to the
appropriate department of the SES. The
resolution shall show the action(s) taken
on the report, including the comments and
Manual of Regulations for Non-Bank Financial Institutions
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§§ 4172S - 4174S
12.12.31
observations and the names of the
directors present and absent, among other
things.
NSSLAs as well as external auditors
shall strictly observe the requirements in
the submission of the financial audit report
and reports required to be submitted under
Appendix Q-33.
The audited annual financial
statements required to be submitted shall
in all respect be PFRS/PAS compliant:
Provided, That NSSLAs shall submit to the
Bangko Sentral adjusting entries
reconciling the balances in the financial
statements for prudential reporting with
that in the audited annual financial
statements.
The reports and certifications of
institutions concerned, schedules and
attachments required under this Subsection
shall be considered Category B reports,
delayed submission of which shall be
subject to the penalties under Subsec.
4162S.3
(As amended by Circular Nos. 554 dated 22 December 2006
and 540 dated 09 August 2006)
§ 4172S.1 Audited Financial Statements
of NSSLAs. The following rules shall govern
the utilization and submission of AFS of
NSSLAs.
For purposes of this Section, AFS shall
include the balance sheets, income
statements, statements of changes in equity,
statements of cash flows and notes to
financial statements which shall include
among other information, disclosure of the
volume of past due loans as well as loanloss provisions. On the other hand, financial
audit report shall refer to the AFS and the
opinion of the auditor. The AFS of NSSLAs
with subsidiaries shall be presented side by
side on a solo basis (parent) and on a
consolidated basis (parent and subsidiaries).
(Circular No. 540 dated 09 August 2006)
S Regulations
Part I - Page 24
§ 4172S.2 Posting of audited financial
statements. NSSLAs shall post in
conspicuous places in their head offices, all
their branches and other offices, as well as
in their respective websites, their latest
financial audit report.
(Circular No. 540 dated 09 August 2006)
Sec. 4173S (Reserved)
Sec.
4174S
Risk
Management
Function. The risk management function
is generally responsible for:
(a) identifying the key risk exposures
and assessing and measuring the extent of
risk exposures of the NSSLA and its trust
operations;
(b) monitoring the risk exposures and
determining the corresponding capital
requirement in accordance with the Basel
capital adequacy framework and based on
the NSSLA’s internal capital adequacy
assessment on an on-going basis;
(c) monitoring and assessing decisions
to accept particular risks whether these are
consistent with board approved policies on
risk tolerance and the effectiveness of the
corresponding risk mitigation measures; and
(d) reporting on a regular basis to senior
management and to the board of directors
of the results of assessment and monitoring.
Risk management personnel shall
possess sufficient experience and
qualifications, including knowledge on the
NSSLA business, the developments in the
market, industry and product lines, as well
as mastery of risk disciplines. They shall
have the ability and willingness to challenge
business lines regarding all aspects of risk
arising from the NSSLA’s activities.
Chief Risk Officer (CRO). NSSLA may
appoint a CRO, or any equivalent position,
who shall be independent from executive
functions and business line responsibilities,
operations and revenue-generating
Manual of Regulations for Non-Bank Financial Institutions
§§ 4174S - 4180S
12.12.31
functions. This independence shall be
displayed in practice at all times as such,
the CRO shall report directly to the board
of trustees or to the risk oversight committee
without any impediment.
The CRO shall have sufficient stature,
authority and seniority within the NSSLA.
This will be assessed based on the ability
of the CRO to influence decisions that affect
the NSSLA’s exposure to risk. The CRO shall
have the ability, without compromising his
independence, to engage in discussion with
the board of trustees, chief executive officer
and other senior management on key risk
issues and to access such information as he
deems necessary to form his or her
judgment. The CRO shall meet with the
board of directors/risk oversight committee
on a regular basis and such meetings shall
be duly minuted and adequately
documented.
CROs shall be appointed and replaced
with prior approval of the board of trustees.
In cases, when the CRO will be replaced,
the NSSLA shall report the same to the
appropriate department of the SES within
five (5) days from the time it has been
approved by the board of trustees.
(Circular Nos.757 dated 08 May 2012 and 749 dated 27 February
2012)
Secs. 4175S - 4179S (Reserved)
Sec. 4180S Selection, Appointment,
Reporting Requirements and Delisting of
External Auditors and/or Auditing Firm;
Sanction. Pursuant to Section 58, R.A. No.
8791, and the existing provisions of the
executed Memorandum of Agreement
(MOA) dated 12 August 2009, binding the
Bangko Sentral, SEC, PRC - BOA and the IC
for a simplified and synchronized
accreditation requirements for external
auditor and/or auditing firm, following are
the revised rules and regulations that shall
govern the selection and delisting by the
Bangko Sentral of covered institutions which
under special laws are subject to Bangko
Sentral supervision.
Statement of policy. It is the policy of
the Bangko Sentral to ensure effective audit
and supervision of banks, QBs, trust entities
and/or NSSLAs including their subsidiaries
and affiliates engaged in allied activities and
other FIs which under special laws are
subject to Bangko Sentral supervision, and
to ensure the reliance by Bangko Sentral and
the public on the opinion of external auditors
and auditing firms by prescribing the rules
and regulations that shall govern the
selection, appointment, reporting
requirements and delisting for external
auditors and auditing firms of said
institutions, subject to the binding provisions
of and implementing regulations pursuant
to the aforesaid MOA.
a. Rules and regulations. The revised
rules and regulations that shall govern the
selection and delisting by the Bangko Sentral
of covered institutions which under special
laws are subject to Bangko Sentral
supervision are shown in Appendix S-8.
Sanctions. The applicable sanctions/
penalties prescribed under Sections 36 and
37 of R.A. 7653 to the extent applicable
shall be imposed on the covered institutions,
its audit committee and the directors
approving the hiring of external auditor/
auditing firm who/which are not in the
Bangko Sentral list of selected auditors for
covered institutions or for hiring, and/or
retaining the services of the external auditor/
auditing firm in violation of any of the
provisions of this Section and for noncompliance with the Monetary Board
directive under Item “K” in Appendix S-8.
Erring external auditors/auditing firm may
also be reported by the Bangko Sentral to
the PRC for appropriate disciplinary action.
(As amended by Circular Nos. 660 dated 25 August 2009 and
529 dated 11 May 2006)
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part I - Page 25
§§ 4181S - 4191S
12.12.31
L. MISCELLANEOUS PROVISIONS
Sec. 4181S Publication Requirements
NSSLAs shall, within 120 calendar days after
the close of the calendar year or their fiscal
year, as the case may be, furnish the
Monetary Board and post in any of the
NSSLAs’ bulletin boards or in any other
conspicuous place a copy of their financial
statements showing, in such form and detail
as the Monetary Board shall require, the
amount and character of the assets and
liabilities of the NSSLAs at the end of the
preceding fiscal year. The Monetary Board
may, in addition to the foregoing, require
the disclosure of such other information as
it shall deem necessary for the protection of
the members of the NSSLA.
The consolidated statements of
condition of an NSSLA and its subsidiaries
and associates shall conform with the
guidelines of PAS 27 “Consolidated and
Separate Financial Statements”, except that
for purposes of consolidated financial
statements, only investments in financial
allied subsidiaries except insurance
subsidiaries shall be consolidated on a
line-by-line basis; while insurance and
non-financial allied subsidiaries shall be
accounted for using the equity method.
Financial/non-financial allied/non-allied
associates shall be accounted for using the
equity method in accordance with the
provisions of PAS 28 “Investments in
Associates”. For purposes of separate
financial statements, investments in
financial/non-financial allied/non-allied
subsidiaries/associates,
including
insurance subsidiaries/associates, shall be
accounted for using the equity method.
(As amended by Circular No. 494 dated 20 September 2005)
Sec. 4182S Business Name 1. NSSLAs
organized or operating under R.A. No. 8367
and licensed by the Bangko Sentral shall
include in their names the words “Savings
1
and Loan Association”. Such NSSLAs shall
display in a conspicuous place at their
business offices a sign including, among
other things, the following words:
“Authorized by the Bangko Sentral ng
Pilipinas”.
(As amended by CL Nos. 2008-053 dated 21 August 2008 and
2008-007 dated 05 February 2008)
Sec. 4183S Prohibitions
a. No
person,
association,
partnership or corporation shall do
business as an NSSLA, or shall use the
terms “Savings and Loan Association” or
any other title or name tending to give the
public impression that it is engaged in the
operations and activities of an NSSLA
unless so authorized under R.A. No. 8367
and these regulations.
b. The use by an NSSLA of any other
name or title or combination of names and
titles or any other deviation from the
requirements of this Section shall not be
authorized except upon prior approval of
the Monetary Board.
c. NSSLAs shall not issue, publish or
cause or permit to be issued or published,
any advertisement that it is doing or
permitted to do business which is prohibited
by law to an NSSLA.
d. No NSSLA shall advertise or
represent itself to its members or to the
public as a bank, or as a trust company.
Secs. 4184S - 4189S (Reserved)
Sec. 4190S Guidelines on Outsourcing
The rules on outsourcing of banking functions
as shown in Appendix Q-37 shall be adopted
insofar as they are applicable to NSSLAs.
(As amended by Circular Nos. 764 dated 03 August 2012, 642
dated 30 January 2009, 610 dated 26 May 2008, 596 dated 11
January 2008, 548 dated 25 September 2006 and 543 dated 08
September 2006)
Sec. 4191S (Reserved)
See SEC Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000
S Regulations
Part I - Page 26
Manual of Regulations for Non-Bank Financial Institutions
§§ 4192S - 4196S
13.12.31
Sec. 4192S Prompt Corrective Action
Framework. The framework for the
enforcement of PCA on banks which is in
Appendix Q-40 shall govern the PCA taken
on NSSLAs to the extent applicable, or by
analogy.
managing market risk are continuously
evolving. As such, the guidelines are
intended for general application; specific
application will depend to some extent on
the size, complexity and range of activities
undertaken by NSSLAs.
(Circular No. 523 dated 31 March 2006, as amended by Circular
No. 664 dated 15 September 2009)
(Circular No. 544 dated 15 September 2006)
Sec. 4193S Supervision by Risks. The
guidelines on supervision by risk in
Appendix Q-42 which provide guidance on
how QBs should identify, measure, monitor
and control risks shall govern the
supervision by risks of NSSLAs to the extent
applicable.
The guidelines set forth the expectation
of the Bangko Sentral with respect to the
management of risks and are intended to
provide more consistency in how the riskfocused supervision function is applied to
these risks. The Bangko Sentral will review
the risks to ensure that an NSSLA’s internal
risk management processes are integrated
and comprehensive. All NSSLAs should
follow the guidance in risk management
efforts.
(Circular No. 510 dated 03 February 2006)
Sec. 4194S Market Risk Management
The guidelines on market risk management
for QBs as shown in Appendix Q-43 shall
govern the market risk management of
NSSLAs to the extent applicable.
The guidelines set forth the expectations
of the Bangko Sentral with respect to the
management of market risk and are intended
to provide more consistency in how the riskfocused supervision is applied to this risk.
NSSLAs are expected to have an integrated
approach to risk management to identify,
measure, monitor and control risks. Market
risk should be reviewed together with other
risks to determine overall risk profile.
The Bangko Sentral is aware of the
increasing diversity of financial products and
that industry techniques for measuring and
Sec. 4195S Liquidity Risk Management
The guidelines on liquidity risk management
for QBs as shown in Appendix Q-44 shall
govern the liquidity risk management of
NSSLAs to the extent applicable.
The guidelines set forth the expectations
of the Bangko Sentral with respect to the
management of liquidity risk and are
intended to provide more consistency in
how the risk-focused supervision function
is applied to this risk. NSSLAs are expected
to have an integrated approach to risk
management to identify, measure, monitor
and control risks. Liquidity risk should be
reviewed together with other risks to
determine overall risk profile.
These guidelines are intended for
general application; specific application will
depend on the size and sophistication of a
particular NSSLA and the nature and
complexity of its activities.
(Circular No. 545 dated 15 September 2006)
Sec. 4196S Information Technology Risk
Management (ITRM). The enhanced
guidelines on ITRM keep abreast with the
aggressive and widespread adoption of
technology in the financial service industry
and consequently strengthen existing
Bangko Sentral framework for IT risk
supervision. ITRM should be considered a
component and integrated with the
institutions’ risk management program. The
guidelines likewise provide practical plans
to address risks associated with emerging
trends in technology and growing concerns
on cyber security.
(Circular No. 808 dated 22 August 2013)
Manual of Regulations for Non-Banks Financial Institutions
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Part I - Page 27
§§ 4196S.1 - 4196S.3
13.12.31
§ 4196S.1 Declaration of policy. A
growing number of Bangko Sentral
supervised institutions (BSIs) employ the
advances in technology as leverage to offer
innovative products, deliver fast and efficient
service at affordable prices, and venture to
new markets. Moreover, technology drives
the efficiency of operations and financial
accounting of these institutions, and
improves their decision-making process. As
technology becomes an integral part of the
business and operations of BSIs, such
technology usage and dependence, if not
properly managed, may heighten technology
risks. The Bangko Sentral expects BSIs to
have the knowledge and skills necessary to
understand and effectively manage
technology risks. These institutions are
required to have an integrated approach to
risk management to identify, measure,
monitor and control risks.
(Circular No. 808 dated 22 August 2013)
§ 4196S.2 Purpose and scope. The
enhanced guidelines aim to provide
guidance in managing risks associated with
use of technology. The guidelines outlined
are based on international standards and
recognized principles of international
practice for ITRM and shall serve as Bangko
Sentral’s baseline requirement for all BSIs.
The guidelines shall apply to BSIs which
include banks, non-banks with quasibanking function (NBQB), non-bank
electronic money issuers and other non-bank
institutions which under existing Bangko
Sentral rules and regulations and special
laws are subject to Bangko Sentral
supervision and/or regulation. Moreover,
subject guidelines shall also apply to BSIs
with offshore data processing as may be
appropriate to their situation. The
framework covers different facets of ITRM,
some of which are supplemented with
detailed guidelines in Appendices Q-59a,
Q-59b, Q-59c, Q-59d, Q-59e and Q-59f.
The Bangko Sentral shall keep the
Appendices updated and, in the future, issue
S Regulations
Part I - Page 28
additional regulations on new and emerging
products, services, delivery channels, and
other significant applications of technology.
Subject guidelines, including the
Appendices Q-59a, Q-59b, Q-59c, Q-59d,
Q-59e and Q-59f, are not “one-size-fits-all”
and implementation of these need to be riskbased and commensurate with size, nature
and types of products and services and
complexity of IT operations of the individual
BSIs. BSIs shall exercise sound judgment in
determining applicable provisions relevant
to their risk profile.
(Circular No. 808 dated 22 August 2013)
§ 4196S.3 Complexity of IT risk profile
The Bangko Sentral shall risk profile all BSIs
and classify them as either “Complex” or
“Simple”. The assessment of complexity of
IT risk profile is based largely on the degree
of adoption of technology and considers
size, nature and types of products and
services and complexity of IT operations
among the risk factors. In assessing IT
operations, the nature of IT organization,
degree of automation of core processes and
applications and extent and reach of online
branch network are likewise considered.
A BSI with “Complex” IT risk profile is
highly dependent on technology. IT
components are integral to the core business
activities that major weaknesses on IT
systems, maintenance and support, if not
properly addressed, may cause operational
inefficiencies, business disruptions and/or
financial losses. On the other hand, a BSI
with “Simple” IT risk profile relies or
depends less on technology in the
operations of its business, thus, is not
affected or lowly impacted by IT-related
risks.
Non-bank institutions which under
existing Bangko Sentral rules and regulations
and special laws are subject to Bangko
Sentral supervision/regulation shall be
notified in writing of their classification
immediately after 14 September 2013.
(Circular No. 808 dated 22 August 2013)
Manual of Regulations for Non-Banks Financial Institutions
§§ 4196S.4 - 4196S.5
13.12.31
§ 4196S.4 IT rating system.The Bangko
Sentral, in the course of its on-site
examination activities, shall evaluate BSIs’
ITRM system and measure the results based
on Bangko Sentral’s IT rating system. A
composite rating is assigned based on a “1”
to “4” numerical scale, as follows:
4
3
BSIs with this rating exhibit strong
performance in every respect.
Noted weaknesses in IT are minor
in nature and can be easily
corrected during the normal
course of business.
BSIs with this rating exhibit
satisfactory performance but may
demonstrate modest weaknesses
in operating performance,
monitoring, management
processes or system development.
2
BSIs with this rating exhibit less
than satisfactory performance and
require considerable degree of
supervision due to a combination
of weaknesses that may range
from moderate to severe.
1
BSIs with this rating exhibit
deficient IT environment that may
impair the future viability of the
entity, thereby requiring
immediate remedial action.
Terminology
Cyberfraud
(Circular No. 808 dated 22 August 2013)
§ 4196S.5 Definition of terms. In these
guidelines, terms are used with the
following meanings:
Terminology
Definitions
Board of
The governing body
Directors
elected by the
(Board)
stockholders that
exercises the corporate
powers of a locally
incorporated BSI. In
case of a BSI
Manual of Regulations for Non-Banks Financial Institutions
Definitions
incorporated or
established outside the
Philippines, this
may refer to the
functional oversight
equivalent such as
the Country Head
(for foreign banks) or
management
committee or body
empowered with
oversight and
supervision
responsibilities.
A deliberate act of
omission or
commission by any
person carried out
using the Internet and/
or other electronic
channels, in order to
communicate false or
fraudulent
representations to
prospective victims,
to conduct fraudulent
transactions, or to
transmit the proceeds
of fraud to FIs
connected with the
perpetrator. Examples
of cyberfraud in the
financial industry may
include, but are not
limited to, theft of
credit card data,
computer hacking,
electronic identity
theft, phishing scams,
ATM skimming and
non-delivery of
merchandise
purhased online,
among others.
S Regulations
Part I - Page 29
§ 4196S.5
13.12.31
Terminology
Electronic
Products and
Services
EMV (stands
for Europay,
Mastercard
and Visa)
S Regulations
Part I - Page 30
Definitions
The delivery of
banking and financial
products and services
through electronic,
interactive
communication
channels which
include automated
teller machines
(ATMs), point of sales
(POS) terminals,
internet, mobile
phones, touch tone
telephones and
other similar
electronic devices.
These encompass
electronic banking,
electronic payments,
electronic money and
other electronic
products and services
offered by BSIs.
It is a global standard
for credit, debit
and prepaid
payment cards based
on chip card
technology. EMV chipbased payment cards,
also known as smart
cards, contain an
embedded
microprocessor, a type
of small computer. The
microprocessor chip
contains the information
needed to use the card
for payment, and is
protected by various
security features. Chip
cards are a more secure
alternative to traditional
magnetic stripe
payment cards.
Terminology
Encryption
Enterprisewide Level
Information
Asset/
Resources
Information
Security
Definitions
A data security
technique used to
protect information
from unauthorized
inspection or alteration.
Information is encoded
so that data appears as
meaningless string of
letters and symbols
during delivery or
transmission. Upon
receipt, the information
is decoded using an
encryption key.
Extending throughout
or involving an entire
institution rather than
a single business
department or function.
In this document, the
words "enterprise-wide"
and "organization-wide"
are interchangeably
used.
Encompass people and
organization, IT
processes, physical
infrastructure (i.e.
facilities, equipment),
IT infrastructure
(including computing
hardware, network
infrastructure,
middleware) and other
enterprise architecture
components (including
information,
applications).
The protection of
information assets from
unauthorized access,
use, disclosure,
disruption, modification
or destruction in order
to provide
confidentiality, integrity
and availability.
Manual of Regulations for Non-Banks Financial Institutions
§ 4196S.5
13.12.31
Terminology
Information
Security
Incident
Definitions
A single or a series of
unwanted or
unexpected
information security
events that have a
significant probability
of compromising
business operations
and threatening the
confidentiality,
integrity or availability
of BSI's information or
information systems.
Information
Automated means of
Technology
originating, processing,
(IT)
storing and
communicating
information and covers
recording devices,
communications
network, computer
systems (including
hardware and software
components and data)
and other electronic
devices.
IT Group/
The unit of an
Department organization within a
BSI responsible for the
activities of IT
operations control,
monitoring of IT
services, infrastructure
support and a
combination of
technology, people
and processes.
IT Operations Encompasses all
processes and services
that are provisioned by
an IT Unit to internal
and external clients.
IT
An arrangement under
Outsourcing
which another party
(either an affiliated
entity within a
corporate group or an
entity external to the
corporate group)
Terminology
Definitions
undertakes to provide
to a BSI all or part of an
IT function or service.
A BSI would use IT
outsourcing for
functions ranging from
infrastructure to
software development,
maintenance and
support. The related
IT service is integral to
the provision by BSI of
a financial service and
the BSI is dependent
on the service on an
ongoing basis.
IT Risk
Any potential adverse
outcome, damage, loss,
violation, failure or
disruption associated
with the use of or
reliance on computer
hardware, software,
devices, systems,
applications and
networks.
IT Strategic A long-term plan (i.e.,
Plan
three (3)- to five (5)- year
horizon) in which
business and IT
management
cooperatively describe
how IT resources will
contribute to the
institution's strategic
objectives.
IT Risk
Risk management
Management system that enables a
System
BSI to identify, measure,
(ITRMS)
monitor and control
IT-related risks.
Management A general term for the
Information computer systems in an
System (MIS) institution that provide
information about its
business operations.
Manual of Regulations for Non-Banks Financial Institutions
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§§ 4196S.5- 4196S.6
13.12.31
Terminology
Definitions
Network
Two (2) or more
computer systems that
are grouped together to
share information,
software and hardware.
Offshore BSIs Have their critical
system processing and
data located outside of
the Philippines. These
are usually maintained
and operated by
organizations within
the same business group
that the BSIs belong to,
such as their head office,
subsidiary and/or
affiliate. Locallymaintained systems, if
any, are limited to noncore supporting
applications such as
collaboration systems
and report processing
tools.
Project
Planning, monitoring
Management and controlling an
activity.
Senior
Officers of the
Management/ institution given the
Management authority by the Board
to implement the
policies it has laid
down in the conduct
of the business of the
institution.
Service Level Establishes mutual
Agreement
expectations and
provide a baseline to
measure IT
performance. An SLA
should contain,
among others, the
specified level of
service, support
options, enforcement
or penalty provisions
for services not provided,
S Regulations
Part I - Page 32
Terminology
Definitions
a guaranteed level of
system performance as
it relates to downtime
or uptime, a specified
level of customer
support and what
software or hardware
will be provided and
for what fee.
Triple Data A mode of the DES
Encryption encryption algorithm
Standard that encrypts data three
(3DES)
times. Three 64-bit keys
are used, instead of one,
for an overall key length
of 192 bits (the first
encryption is encrypted
with second key, and
the resulting cipher text
is again encrypted with
a third key)
(Circular No. 808 dated 22 August 2013)
§ 4196S.6 Description of IT-related
risks. As BSIs increase their reliance on IT
to deliver products and services,
inappropriate usage of IT resources may
have significant risk exposures. While IT
does not trigger new types of risks, it brings
in new dimensions to traditional banking
risks (i.e. strategic risk, credit risk, market
risk, liquidity risk and operational risk) that
require new or enhanced control activities
(e.g. a failure of a credit risk measurement
application is an IT failure and, therefore, a
systems failure in the sense of operational
risk). Moreover, IT is an implied part of any
system of internal controls, regardless of the
type of risk and, consequently, forms an
important element in organization-wide risk
management. Among the risks associated
with the use of IT are the following:
1. Operational risk is the risk to earnings
and capital arising from problems with
service or product delivery. This risk is a
function of internal controls, IT systems,
Manual of Regulations for Non-Banks Financial Institutions
§§ 4196S.6- 4196S.7
13.12.31
employee integrity and operating processes.
Operational risk exists in all products and
services;
2. Strategic risk is the risk to earnings
and capital arising from adverse business
decisions on IT-related investments or
improper implementation of those
decisions. The risk is a function of the
compatibility of an organization’s strategic
goals, the business strategies developed to
achieve those goals, the resources deployed
against these goals and the quality of
implementation. The resources needed to
carry out business strategies are both
tangible and intangible which include
communication channels, operating
systems, delivery networks and managerial
capacities and capabilities;
3. Reputation risk is the risk to earnings
and capital arising from negative public
opinion. This affects the institution’s ability
to establish new relationships or services
or continue servicing existing relationships.
The risk can expose the institution to
litigation, financial loss or damage to its
reputation; and
4. Compliance risk is the risk to earnings
and capital arising from the violations of,
or non-conformance with laws, rules and
regulations, prescribed practices or ethical
standards. Compliance risk also arises in
situations where the laws and rules
governing certain products activities of the
BSI’s clients may be ambiguous or untested.
Compliance risk exposes the institution to
monetary penalties, non-monetary sanctions
and possibility of contracts being annulled
or declared unenforceable.
(Circular No. 808 dated 22 August 2013)
§ 4196S.7 IT Risk Management System
(ITRMS). As BSIs become more dependent
on IT systems and processes, technology
risks and information security issues have
become progressively more complex and
pressing in recent years. Information
security is just as important as the new
technologies being installed by BSIs. As
progress in technology shifts to higher gear,
the trend in cyber-attacks, intrusions, and
other form of incidents on computer systems
shows that it will not only persist but will
continue to increase in frequency and spread
in magnitude.
Management of IT risks and information
security issues becomes a necessity and an
important part of BSIs’ risk management
system. BSIs are therefore required to
establish a robust ITRM system covering four
(4) key components: 1) IT governance,
2) risk identification and assessment, 3) IT
controls implementation, and 4) risk
measurement and monitoring.
1. IT Governance. This is an integral
part of BSIs’ governance framework and
consists of the leadership and organizational
structures and processes that ensure the
alignment of IT strategic plan with BSIs’
business strategy, optimization of resources
management, IT value delivery, performance
measurement and the effective and efficient
use of IT to achieve business objectives and
effective
IT
risk
management
implementation. BSIs must establish an
effective IT governance framework covering
the following:
a. Oversight and organization of IT
functions. Accountability is a key concern
of IT governance and this can be obtained
with an organizational structure that has
well-defined roles for the responsibility of
information, business processes,
applications, IT infrastructure, etc.
The Board of Directors is ultimately
responsible for understanding the IT risks
confronted by a BSI and ensuring that they
are properly managed, whereas the Senior
Management is accountable for designing
and implementing the ITRMS approved by
the Board. For Complex BSIs, the Board may
delegate to an IT Steering Committee (ITSC)
or its equivalent IT oversight function to
cohesively monitor IT performance and
institute appropriate actions to ensure
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§ 4196S.7
13.12.31
achievement of desired results. The ITSC,
at a minimum, should have as members a
non-executive Board director who oversees
the institution’s IT function, the head of IT
group/department, and the highest rank
officer who oversees the business user
groups. The head of control groups should
participate in ITSC meetings in advisory
capacity only.
A charter should be ratified by the Board
to clearly define the roles and
responsibilities of the ITSC. Formal minutes
of meeting should be maintained to
document its discussions and decisions. The
ITSC should regularly provide adequate
information to the Board regarding IT
performance, status of major IT projects or
other significant issues to enable the Board
to make well-informed decisions about the
BSIs’ IT operations.
BSIs should develop an IT strategic plan
that is aligned with the institution’s business
strategy. This should be undertaken to
manage and direct all IT resources in line
with the business strategy and priorities. IT
strategic plan should focus on long term
goals covering three (3)- to five (5)- year
horizon and should be sufficiently
supplemented by tactical IT plans which
specify concise objectives, action plans and
tasks that are understood and accepted by
both business and IT. The IT strategic plan
should be formally documented, endorsed
by the Board and communicated to all
stakeholders. It should be reviewed and
updated regularly for new risks or
opportunities to maximize the value of IT to
the institution.
BSIs should also create an organization
of IT functions that will effectively deliver
IT services to business units. For “Complex”
BSIs, a full-time IT Head or equivalent rank
should be designated to take the lead in key
IT initiatives and oversee the effectiveness
of the IT organization. In addition to
managing the delivery of day-to-day IT
services, the IT Head should also oversee
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the IT budget and maintain responsibility
for performance management, IT acquisition
oversight, professional development and
training. The IT Head should be a member
of executive management with direct
involvement in key decisions for the BSI and
usually reports directly to the President or
Chief Executive Officer.
A clear description of roles and
responsibilities for individual IT functions
should be documented and approved by the
Board. Proper segregation of duties within
and among the various IT functions should
be implemented to reduce the possibility
for an individual to compromise a critical
process. A mechanism should be in place
to ensure that personnel are performing only
the functions relevant to their respective jobs
and positions. In the event that an institution
finds it difficult to segregate certain IT control
responsibilities, it should put in place
adequate compensating controls (e.g. peer
reviews) to mitigate the associated risks.
b. IT policies, procedures and
standards. IT controls, policies, and
procedures are the foundation of IT
governance structure. It helps articulate the
rules and procedures for making IT
decisions, and helps to set, attain, and
monitor IT objectives.
BSIs should adopt and enforce IT-related
policies and procedures that are welldefined and frequently communicated to
establish and delineate duties and
responsibilities of personnel for better
coordination, effective and consistent
performance of tasks, and quicker training
of new employees. Management should
ensure that policies, procedures, and
systems are current and well-documented.
The ITSC should review IT policies,
procedures, and standards at least on an
annual basis. Any updates and changes
should be clearly documented and properly
approved. IT policies and procedures
should include at least the following areas:
• IT Governance/Management;
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13.12.31
• Development and Acquisition;
• IT Operations;
• Communication networks;
• Information security;
• Electronic Banking/Electronic
Products and Services; and
• IT Outsourcing/Vendor Management.
For simple BSIs, some of the above areas
(i.e. development, electronic banking, etc.)
may not be applicable, thus sound judgment
should be employed to ensure that the BSI’s
IT policies and procedures have adequately
covered all applicable areas.
c. IT audit. Audit plays a key role in
assisting the Board in the discharge of its
corporate governance responsibilities by
performing an independent assessment of
technology risk management process and
IT controls.
Auditors provide an assurance that
important control mechanisms are in place
for detecting deficiencies and managing risks
in the implementation of IT. They should
be qualified to assess the specific risks that
arise from specific uses of IT. BSIs should
establish effective audit programs that cover
IT risk exposures throughout the
organization, risk-focused, promote sound
IT controls, ensure the timely resolution of
audit deficiencies and periodic reporting to
the Board on the effectiveness of institution’s
IT risk management, internal controls, and
IT governance. Regardless of size and
complexity, the IT audit program should
cover the following:
• Independence of the IT audit
function and its reporting relationship to the
Board or its Audit Committee;
• Expertise and size of the audit staff
relative to the IT environment;
• Identification of the IT audit
universe, risk assessment, scope, and
frequency of IT audits;
• Processes in place to ensure timely
tracking and resolution of reported
weaknesses; and
•
Documentation of IT audits,
including work papers, audit reports, and
follow-up.
In case in-house IT audit expertise is not
available, such as for a simple BSI, the IT
audit support may be performed by external
specialists and auditors of other institutions
consistent with existing Bangko Sentral rules
and regulations on outsourcing. (Detailed
guidelines/standards on IT Audit are shown
in Appendix Q-59a)
d. Staff competence and training. The
rapid development in technology demands
appropriate, skilled personnel to remain
competent and meet the required level of
expertise on an ongoing basis.
BSIs should have an effective IT human
resources management plan that meets the
requirements for IT and the business lines it
supports. Management should allocate
sufficient resources to hire and train
employees to ensure that they have the
expertise necessary to perform their job and
achieve organizational goals and objectives.
Management needs to ensure that
staffing levels are sufficient to handle present
and expected work demands, and to cater
reasonably for staff turnover. Appropriate
succession and transition strategies for key
officers and personnel should be in place
to provide for a smooth transition in the
event of turnover in vital IT management or
operations functions.
e. Management Information Systems
(MIS). The BSIs’ IT organization often
provides an important support role for their
MIS. Accurate and timely MIS reports are
an essential component of prudent and
reasonable business decisions. At the most
senior levels, MIS provides the data and
information to help the Board and
management make strategic decisions. At
other levels, MIS allows management to
monitor the institution’s activities and
distribute information to other employees,
customers, and members of management.
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§ 4196S.7
13.12.31
Advances in technology have increased
the volume of information available to
management and directors for planning and
decision-making. However, if technology
is not properly managed, the potential for
inaccurate reporting and flawed decision
making increases. Because report
generation systems can rely on manual data
entry or extract data from many different
financial and transaction systems,
management should establish appropriate
control procedures to ensure information is
correct, relevant, and adequately protected.
Since MIS can originate from multiple
equipment platforms and systems, the
controls should ensure all information
systems have sufficient and appropriate
controls to maintain the integrity of the
information and the processing
environment. Sound fundamental principles
for MIS review include proper internal
controls, operating procedures, safeguards,
and audit coverage.
f. IT risk management function.
Management of risk is a cornerstone of IT
Governance. BSIs should have a policy
requiring the conduct of identification,
measurement, monitoring and controlling of
IT risks for each business function/service
on a periodic basis. BSIs should define and
assign these critical roles to a risk
management unit or to a group of persons
from different units collectively performing
the tasks defined for this function.
The function should have a formal
technology risk acknowledgement and
acceptance process by the owner of risk to
help facilitate the process of reviewing,
evaluating and approving any major
incidents of non-compliance with IT control
policies. The process can be supported by
the following:
• a description of risk being
considered for acknowledgement by owner
of risk and an assessment of the risk that is
being accepted;
• identification of mitigating controls;
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• formulation of a remedial plan to
reduce risk; and
• approval of risk acknowledgement
from the owner of the risk and senior
management.
ITRM processes should be integrated
into the enterprise-wide risk management
processes to allow BSIs to make wellinformed decisions involving business plans
and strategies, risk responses, risk tolerance
levels and capital management, among
others.
2. Risk identification and assessment.
BSIs should maintain a risk assessment
process that drives response selection and
controls implementation. An effective IT
assessment process begins with the
identification of the current and prospective
IT risk exposures arising from the
institution’s IT environment and related
processes. The assessments should identify
all information assets, any foreseeable
internal and external threats to these assets,
the likelihood of the threats, and the
adequacy of existing controls to mitigate the
identified risks. Management should
continually compare its risk exposure to the
value of its business activities to determine
acceptable risk levels.
Once management understands the
institution’s IT environment and analyzes
the risk, it should rank the risks and prioritize
its response. The probability of occurrence
and the magnitude of impact provide the
foundation for reducing risk exposures or
establishing mitigating controls for safe,
sound, and efficient IT operations
appropriate to the complexity of the
organization. Periodic risk assessment
process should be done at the enterprisewide level and an effective monitoring
program for the risk mitigation activities
should be manifested through mitigation or
corrective action plans, assignment of
responsibilities and accountability and
management reporting.
Manual of Regulations for Non-Banks Financial Institutions
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13.12.31
3. IT controls implementation. Controls
comprise of policies, procedures, practices
and organizational structures designed to
provide reasonable assurance that business
objectives will be achieved and undesired
events will be mitigated. Management
should establish an adequate and effective
system of internal controls based on the
degree of exposure and the potential risk of
loss arising from the use of IT. Controls for
IT environment generally should address the
overall integrity of the environment and
should include clear and measurable
performance goals, the allocation of specific
responsibilities for key project
implementation, and independent
mechanisms that will both measure risks
and minimize excessive risk-taking. BSI
Management should implement satisfactory
control practices that address the following
as part of its overall IT risk mitigation
strategy: 1) Information security; 2) Project
management/development and acquisition
and change management; 3) IT operations;
4) IT outsourcing/Vendor management; and
5) Electronic banking, Electronic payments,
Electronic money and other Electronic
products and services.
a. Information security. Information is
a vital asset that must be managed to support
BSI management in making decisions. BSIs
should have a comprehensive information
security program, approved by the Board,
to maintain the confidentiality, integrity, and
availability of computer systems for reliable
and timely information. Unauthorized
access, destruction, or disclosure of
confidential information can adversely affect
earnings and capital. The program should
monitor information security function
throughout the organization’s business
processes and establish clear accountability
for carrying out security responsibilities.
The Board or Senior Management
should appoint an independent information
security officer (ISO) who will be
responsible and accountable for the
organization-wide IS program. The duly
appointed ISO should have sufficient
knowledge, background, and training, as
well as organizational position, to enable
him to perform assigned tasks. To ensure
appropriate segregation of duties, the ISO
should report directly to the Board or senior
management and have sufficient
independence to perform his mandate. The
ISO should perform the tasks of a risk
manager and not a production resource
assigned to the IT department. In the case
of simple BSIs, hiring a personnel to
specifically perform the function of an ISO
may not be necessary. The ISO function
may be assigned to an existing independent
officer who meets the requirements
mentioned in this Subsection. (Detailed
guidelines/standards on Information Security
are shown in Appendix Q-59b)
b. Project management/development
and acquisition and change management.
BSIs should establish a framework for
management of IT-related projects. The
framework should clearly specify the
appropriate project management
methodology that will govern the process
of developing, implementing and
maintaining major IT systems. The
methodology, on the other hand, should
cover allocation of responsibilities, activity
breakdown, budgeting of time and
resources, milestones, checkpoints, key
dependencies, quality assurance, risk
assessment and approvals, among others.
In the acquisition and/or development of IT
solutions, BSIs should ensure that business
and regulatory requirements are satisfied.
(Detailed guidelines/standards on Project
Management/ Development and Acquisition
and Change Management are shown in
Appendix Q-59c)
c. IT operations. IT has become an
integral part of the day-to-day business
operation, automating and providing
support to nearly all of the business
processes and functions within the
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§ 4196S.7
13.12.31
institution. Therefore, the IT systems should
be reliable, secure and available when
needed which translates to high levels of
service and dependency on IT to operate.
One of the primary responsibilities of
IT operations management is to ensure the
institution’s current and planned
infrastructure is sufficient to accomplish its
strategic plans. BSI management should
ensure that IT operates in a safe, sound, and
efficient manner throughout the institution.
Given that most IT systems are
interconnected and interdependent, failure
to adequately supervise any part of the IT
environment can heighten potential risks for
all elements of IT operations and the
performance of the critical business lines of
the BSIs. Such scenario necessitates the
coordination of IT controls throughout the
institution’s operating environment.
(Detailed guidelines/standards on IT
Operations are shown in Appendix Q-59d)
d. IT outsourcing/vendor management
program. IT outsourcing refers to any
contractual agreement between a BSI and a
service provider or vendor for the latter to
create, maintain, or reengineer the
institution’s IT architecture, systems and
related processes on a continuing basis. A
BSI may outsource IT systems and processes
except those functions expressly prohibited
by existing regulations. The decision to
outsource should fit into the institution’s
overall strategic plan and corporate
objectives and said arrangement should
comply with the provisions of existing
Bangko Sentral rules and regulations on
outsourcing. Although the technology
needed to support business objectives is
often a critical factor in deciding to
outsource, managing such relationships
should be viewed as an enterprise-wide
corporate management issue, rather than a
mere IT issue.
While IT outsourcing transfers
operational responsibility to the service
provider, the BSIs retain ultimate
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responsibility for the outsourced activity.
Moreover, the risks associated with the
outsourced activity may be realized in a
different manner than if the functions were
inside the institution resulting in the need
for controls designed to monitor such risks.
BSI management should implement an
effective outsourcing oversight program that
provides the framework for management to
understand, monitor, measure, and control
the risks associated with outsourcing. BSIs
outsourcing IT services should have a
comprehensive
outsourcing
risk
management process which provides
guidance on the following areas: 1) risk
assessment; 2) selection of service
providers; 3) contract review; and
4) monitoring of service providers. Detailed
guidelines/standards on IT Outsourcing/
Vendor Management and on the adoption
of outsourced cloud computing model are
shown in Appendix Q-59e.
e. Electronic products and services. The
evolution in technology revolutionized the
way banking and financial products and
services are delivered. Physical barriers
were brought down enabling clients to
access their accounts, make transactions or
gather information on financial products and
services anywhere they are, at any time of
the day and at their own convenience. As
development in technology continues to
accelerate, innovative electronic products
and services are foreseen to bring more
accessibility and efficiency. However, BSIs
may be confronted with challenges relating
to capacity, availability and reliability of the
electronic services. Likewise, fraudulent
activities via electronic channels are also
rising in number.
BSIs should protect customers from
fraudulent schemes done electronically.
Otherwise, consumer confidence to use
electronic channels as safe and reliable
method of making transactions will be
eroded. To mitigate the impact of cyber
fraud, BSIs should adopt aggressive security
Manual of Regulations for Non-Banks Financial Institutions
§ 4196S.7
13.12.31
posture such as the following:
i. The entire ATM system shall be
upgraded/converted to allow adoption of
end-to-end Triple DES (3DES) encryption
standards by 01 January 2015. The 3DES
encryption standards shall cover the whole
ATM network which consists of the host
processors, switches, host security module
(HSM), automated teller machines (ATMs),
point-of-sale (POS) terminals and all
communication links connected to the
network;
ii. ATMs to be installed after
14 September 2013 should be 3DES
compliant; and
iii. ATMs, POS terminals and payment
cards are also vulnerable to skimming
attacks due to the lack of deployment of
globally recognized EMV enabled
technology by BSIs. Magnetic stripe only
ATMs, POS Terminals and cards are largely
defenseless against modern fraud
techniques. Therefore, all concerned BSIs
should shift from magnetic stripe technology
to EMV chip-enabled cards, POS Terminals
and ATMs. The entire payment card
network should be migrated to EMV by
01 January 2017. This requirement shall
cover both issuing and acquiring programs
of concerned BSIs. A written and Boardapproved EMV migration plan should be
submitted to Bangko Sentral within six (6)
months from 22 August 2013. Likewise, the
detailed guidelines covering subject EMV
requirement shall be issued separately.
Detailed guidelines/standards on
Electronic Products and Services are shown
in Appendix Q-59f.
4. Risk measurement and monitoring.
BSI Management should monitor IT risks
and the effectiveness of established controls
through periodic measurement of IT
activities based on internally established
standards and industry benchmarks to assess
the effectiveness and efficiency of existing
operations. Timely, accurate, and complete
risk monitoring and assessment reports
should be submitted to management to
provide assurance that established controls
are functioning effectively, resources are
operating properly and used efficiently and
IT operations are performing within
established parameters. Any deviation noted
in the process should be evaluated and
management should initiate remedial action
to address underlying causes. The scope
and frequency of these performance
measurement activities will depend on the
complexity of the BSI’s IT risk profile and
should cover, among others, the following:
a. Performance vis-à-vis approved IT
strategic plan. As part of both planning and
monitoring mechanisms, BSI management
should periodically assess its uses of IT as
part of overall business planning. Such an
enterprise-wide and ongoing approach
helps to ensure that all major IT projects are
consistent with the BSI’s overall strategic
goals.
Periodic monitoring of IT
performance against established plans shall
confirm whether IT strategic plans remain
in alignment with the business strategy and
the IT performance supports the planned
strategy.
b. Performance benchmarks/service
levels. BSIs should establish performance
benchmarks or standards for IT functions
and monitor them on a regular basis. Such
monitoring can identify potential problem
areas and provide assurance that IT
functions are meeting the objectives. Areas
to consider include system and network
availability, data center availability, system
reruns, out of balance conditions, response
time, error rates, data entry volumes, special
requests, and problem reports.
Management should properly define
services and service level agreements (SLA)
that must be monitored and measured in
terms understandable to the business units.
SLA with business units and IT department
should be established to provide a baseline
to measure IT performance.
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§§ 4196S.7- 4196S.9
13.12.31
c. Quality assurance/quality control.
BSI should establish quality assurance (QA)
and quality control (QC) procedures for all
significant activities, both internal and
external, to ensure that IT is delivering value
to business in a cost effective manner and
promotes continuous improvement through
ongoing monitoring. QA activities ensure
that product conforms to specification and
is fit for use while QC procedures identify
weaknesses in work products and to avoid
the resource drain and expense of redoing
a task. The personnel performing QA and
QC reviews should be independent of the
product/process being reviewed and use
quantifiable indicators to ensure objective
assessment of the effectiveness of IT
activities in delivering IT capabilities and
services.
d. Policy compliance. BSIs should
develop, implement, and monitor processes
to measure IT compliance with their
established policies and standards as well
as regulatory requirements. In addition to
the traditional reliance on internal and third
party audit functions, BSIs should perform
self-assessments on a periodic basis to gauge
performance which often lead to early
identification of emerging or changing risks
requiring policy changes and updates.
e. External assessment program.
Complex BSIs may also seek regular
assurance that IT assets are appropriately
secured and that their IT security risk
management framework is effective. This
may be executed through a formal external
assessment program that facilitates a
systematic assessment of the IT security risk
and control environment over time.
(Circular No. 808 dated 22 August 2013)
§ 4196S.8 Reports. To enable the
Bangko Sentral to regularly monitor IT risk
profile and electronic products, services,
delivery channels, processes and other
relevant information regarding the use of
technology, BSIs are required to submit the
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following:
1. Annual IT Profile, electronically to
the Bangko Sentral Supervisory Data Center
(SDC) within twenty five (25) days from the
end of reference year (Guidelines to be
observed in the preparation and submission
of this report was issued under Bangko
Sentral Memorandum to All Banks No.
M-2012-011 dated 17 February 2012);
2. Report on breach in information
security, especially incidents involving the
use of electronic channels, pursuant to the
provisions of Items “a” or “b” of Appendix
Q-60 following the guidelines provided in
Item “d” thereof. Depending on the nature
and seriousness of the incident, Bangko
Sentral may require the BSI to provide
further information or updates on the
reported incident until the matter is finally
resolved; and
3. Notification letter to the Core
Information Technology Specialist Group
(CITSG) of the Bangko Sentral of disruption
of IT services/operations that resulted to the
activation of disaster recovery and business
continuity plan immediately upon activation
of the plan.
(Circular No. 808 dated 22 August 2013)
§ 4196S.9 Sanctions and penalties. BSIs
should make available IT policies and
procedures on the foregoing and other
related documents during the on-site
examination as well as provide a copy
thereof when written request was made to
determine their compliance with this
Section.
Any violation of the provisions of this
Section, its appendices and annexes, shall
be subject to the monetary and nonmonetary sanctions provided under Section
37 of R.A. No. 7653. Enforcement actions
shall be imposed on the basis of the overall
assessment of BSIs’ ITRMS. Whenever a
BSI’s ITRMS is rated “1” pursuant to
Subsection 4196S.4, the following
Manual of Regulations for Non-Banks Financial Institutions
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13.12.31
additional sanctions may be imposed:
1. Suspension/revocation of authority
to provide electronic products and services;
and
2. Prohibition against offering/
provision of new electronic products and
services.
(Circular No. 808 dated 22 August 2013)
Secs. 4197S - 4198S (Reserved)
Sec. 4199S General Provision on Sanctions
Unless otherwise provided, any violation of
the provisions of this Part shall be subject
to the sanctions provided in Sections 34, 35,
36 and 37 of R.A. No. 7653, whenever
applicable.
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§§ 4201S - 4240S
08.12.31
PART TWO
DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS
Section 4201S Checking Accounts. No
NSSLA shall have or carry upon its books
for any person any demand, commercial
or checking account, or any credit to be
withdrawn upon the presentation of any
negotiable check or draft.
Secs. 4202S - 4205S (Reserved)
may be charged by the NSSLA for every
withdrawal made in excess of the maximum
number allowed in any one (1) month.
Sec. 4209S Dormant Savings Deposits
NSSLAs may charge a fee, the amount of
which shall be approved by the BSP for
the maintenance of dormant savings
deposits. Savings deposit shall be classified
as dormant if no deposit or withdrawal has
been made for the last two (2) years.
B. SAVINGS DEPOSITS
Secs. 4210S – 4215S (Reserved)
Sec. 4206S Definition. Savings deposits
are deposits evidenced by a passbook
consisting of funds deposited to the credit
of one (1) or more individuals with respect
to which the depositor may withdraw
anytime, unless prior notice in writing of
an intended withdrawal is required by the
NSSLA.
Sec. 4207S Minimum Deposit. Savings
deposits with NSSLAs may be opened
with a minimum deposit of P100.
Sec. 4208S Withdrawals.
Withdrawal
from a savings deposit shall be made
through the presentation to the NSSLA of
a duly accomplished withdrawal slip
together with the depositor’s passbook.
NSSLAs shall reserve the right to
require the depositor to give prior written
notice of withdrawal of not more than thirty
(30) days.
NSSLAs may limit the number of
withdrawals that a depositor may make:
Provided, That the number of the
withdrawals allowed shall not be less than
three (3) times a month. A service charge
to be determined by the board of trustees
of the NSSLA and approved by the BSP,
C. (RESERVED)
Secs. 4216S - 4220S (Reserved)
D.
TIME DEPOSITS
Sec. 4221S (Reserved)
Sec. 4222S Minimum Term and Size of
Time Deposits
a. Term - No time deposit shall be
accepted for a term of less than thirty (30)
days.
b. Minimum Size - NSSLAs shall not
require a minimum amount of time
deposit greater than P1,000.
Sec. 4223S Withdrawals of Time
Deposits. The withdrawal of a time
deposit can be made only by presentation
of the certificate of time deposit on the
day of or after its maturity.
Secs. 4224S - 4230S (Reserved)
E. - F. (RESERVED)
Secs. 4231S - 4240S (Reserved)
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§§ 4241S - 4261S.5
08.12.31
G. INTEREST ON DEPOSITS
Sec. 4241S Interest on Savings Deposits
Savings deposits of NSSLAs shall not be
subject to any interest rate ceiling.
Sec. 4242S Interest on Time Deposits
Interest on time deposits shall not be subject
to any interest rate ceiling.
§ 4242S.1 Time of payment. Interest
on time deposits may be paid at maturity
or upon withdrawal or in advance:
Provided, however, That interest paid in
advance shall not exceed the interest for
one (1) year.
§ 4242S.2 Treatment of matured
time deposits. A time deposit not
withdrawn or renewed on its due date shall
be treated as a savings deposit and shall
earn an interest from maturity to the date
of actual withdrawal or renewal at a rate
applicable to savings deposits.
Secs.4243S - 4250S (Reserved)
deposit account for himself, provided he
has sufficient discretion. However, he
cannot withdraw therefrom, except
through, or with the assistance of a guardian
authorized to act for him. Parents may
deposit for their minor children, and
guardians for their wards.
Notwithstanding the provisions of the
preceding paragraph, the cashier,
bookkeeper and their assistants, and other
employees of an NSSLA whose duties entail
the handling of cash or checks are prohibited
from opening savings deposit accounts with
the head office or branch of the NSSLA in
which they are assigned as such.
§ 4261S.2 Identification of memberdepositors. NSSLAs shall be responsible
for the proper identification of their
member-depositors.
§ 4261S.3 Number of deposit accounts
A member-depositor may open and have
more than one (1) savings deposit in his own
name in the same capacity, and he may open
and have various deposits in different
capacities such as guardian, agent, or trustee
for others.
H. (RESERVED)
§ 4261S.4 Signature card. A signature
card bearing at least three (3) specimen
signatures of each member-depositor shall
be required upon opening of a deposit
account.
Secs. 4251S – 4260S (Reserved)
I. SUNDRY PROVISIONS ON
DEPOSIT OPERATIONS
Sec. 4261S Opening and Operation of
Deposit Accounts. The following are basic
provisions on the opening and operation of
deposit accounts of NSSLAs.
§ 4261S.1
Who may open deposit
accounts. Only members who have
contributed P1,000 or more to the capital
of the NSSLA may open deposit accounts
with NSSLAs. A natural person, although
lacking capacity to contract, may
nevertheless open a savings or time
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§ 4261S.5 Passbook and certificate
of time deposit. A savings deposit
passbook, signed by the receiving teller and
an authorized officer, shall be issued to a
member-depositor showing, among other
things, his name and address, account
number, date, amount of deposit, interest
credits and balance. NSSLAs shall prenumber their savings deposit passbooks. In
the case of a time deposit, a certificate of
time deposit signed by two (2) authorized
officers, shall be issued to the member-
Manual of Regulations for Non-Bank Financial Institutions
§§ 4261S.5 - 4299S
08.12.31
depositor containing, among other things,
his name, amount of deposit, date when
the deposit was made, its due date and
interest rate.
§ 4261S.6 Deposits in checks and
other cash items. Checks and other cash
items may be accepted for deposit by
NSSLAs: Provided, That withdrawals
from such deposits shall not be made until
the check or other cash item is collected.
Secs. 4262S - 4280S (Reserved)
J. (RESERVED)
Secs. 4281S - 4285S (Reserved)
K. OTHER BORROWINGS
Sec. 4286S Borrowings. An NSSLA may
borrow money or incur such obligation up
to not more than twenty percent (20%) of
the total assets of the NSSLA, from any
public lending institution, and from private
banking institutions, and such private
lending institutions as may be approved
by the Monetary Board: Provided, That
the proceeds of such loan shall be used
exclusively to meet the normal credit
requirements of its members. The
Monetary Board may, in meritorious
cases, raise the ceiling on the borrowing
capacity of an NSSLA to not more than
thirty percent (30%) of its total assets.
NSSLAs organized by employees of an
entity or a corporation may borrow funds
from said entity or corporation, but not
vice-versa.
Secs. 4287S - 4298S (Reserved)
Sec. 4299S General Provision on
Sanctions. Unless otherwise provided,
any violation of the provisions of this Part
shall be subject to the sanctions provided
in Sections 34, 35, 36 and 37 of R.A. No.
7653, whenever applicable.
Manual of Regulations for Non-Bank Financial Institutions
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§§ 4301S - 4301S.1
13.12.31
PART THREE
LOANS AND INVESTMENTS
A. LOANS IN GENERAL
Section 4301S Lending Policies. It shall be
the responsibility of the board of trustees of
NSSLAs to formulate written policies on the
extension of credit. Well-defined lending
policies and sound credit risk management
practices are essential if NSSLAs are to
perform their lending function effectively
and minimize the risk inherent in any
extension of credit. The responsibility
should be approached in a way that will
provide assurance to the members, other
stakeholders and the supervisory authority
that timely and adequate action will be taken
to maintain the quality of the loan portfolio.
(As amended by Circular No. 789 dated 28 February 2013)
§ 4301S.1 (2012-4301S) Authority; loan
limits; maturity of loans. The board of
trustees of NSSLAs shall be responsible for
the design of appropriate loan products in
accordance with the Association’s business
strategies and its members’ requirements.
The board of trustees shall ensure that they
fully understand all the risks attendant to the
Association’s lending activities and shall
adopt appropriate risk management policies
and practices that are commensurate to the
risk attendant to their operations, and which,
at a minimum, shall comply with the
regulations and standards prescribed herein.
NSSLAs deemed to be engaged in hazardous
lending practices shall be cited as operating
in an unsafe and unsound manner.
a. Loans products. NSSLAs may grant
loans to members to service the needs of
households by providing long term financing
for home building and development, for
personal finance and for agricultural and
entrepreneurial projects. The board of
trustees of NSSLAs shall consider, among
other things, the following in the definition
of its loan products:
(1) the nature or purpose of the loan;
(2) the repayment capacity and
circumstances of the member-borrower;
(3) terms of the loan; and
(4) normal loan collection cycles.
The definitions and characterization of
all loan products shall be embodied in a
product manual approved by the board of
trustees. The product manual shall, at a
minimum, contain the term of the loan, the
maturity of which shall in no case exceed
the maximum provided under Item “d” of
this Subsection, interest rate, net-take home
pay requirement vis-a-vis the type of
member-borrower, repayment terms,
collection scheme, documentary
requirements and applicable work-out
strategies. The normal collection period,
which refers to the normal period of time
within which the Association is able to effect
the first periodic amortization/salary
deduction for amortization of a loan
reckoned from loan release date, shall
likewise be set by the NSSLA’s board of
trustees and shall be based on the recent
historical experience of the NSSLA (e.g., last
three years) and/or the remittance period
specified in contracts entered into with
private companies or department/branch/
office of government employing the NSSLA’s
members. The NSSLA’s normal collection
period and the manner by which it is
established shall be set forth in the NSSLA’s
loan policies and considered in its overall
risk assets review system in order to reflect
the true status of loan accounts and ensure
that adequate loss reserves are provided. In
no case, however, shall the normal
collection period exceed six (6) months from
the date of release of the loan.
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§§ 4301S.1 - 4302S
13.12.31
b. Loan limit to a single borrower. An
NSSLA may grant loans not exceeding the
amount deposited and/or contributed by the
member-borrower plus his twelve (12)
months salary or retirement pension from
his employment, or up to seventy percent
(70%) of the fair market value of any
property acceptable as collateral on first
mortgage that he may put up by way of
security: Provided, That direct indebtedness
to an NSSLA of any member-borrower for
money borrowed with the exception of
money borrowed against obligations of the
Bangko Sentral or of the Philippine
Government, or borrowed with the full
guarantee of the Philippine Government in
the payment of principal and interest, shall
not exceed fifteen percent (15%) of the
unimpaired capital and surplus of the
NSSLA.
For purposes of this Section, regular
income of persons who are self-employed
shall be their average monthly income
during the twelve (12)-month period
immediately preceding the date of loan
application.
c. Limitations on lending authority.
NSSLAs shall not commit to make any loan
for amounts in excess of the total of the
following amounts:
(1) Amount of cash available for loan
purposes;
(2) Amount of cash which can be readily
realized upon the sale or redemption of
permissible investments made by NSSLAs;
and
(3) Amount of credit available for loan
purposes from government or private FIs.
d. Maximum loan maturity. No loan
granted by NSSLAs shall have a maturity
date of more than five (5) years except loans
on the security of unencumbered real estate
for the purpose of home building and home
development which may be granted with
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Part III - Page 2
maturities not exceeding twenty-five (25)
years and medium or long-term loans to
finance agricultural projects.
(As amended by Circular No. 789 dated 28 February 2013)
Sec. 4302S Basic Requirements in
Granting Loans
a. Application. A member-borrower
applying for a loan must submit an
application stating the purpose of the loan
and such other information as may be
required by the NSSLA. The loan
application and other required documents
shall form part of credit information file of
the member-borrower in the NSSLA.
b. Credit investigation. No loan shall
be approved unless prior investigation has
been made to determine the credit standing
of the applicant and/or the fair market value
of the property offered as security and the
report thereon shall be made part of the
loan application: Provided, however, That
this requirement may be waived by an
NSSLA in the case of permanent employee
or wage earner who is borrowing an
amount not exceeding his deposit plus his
twelve (12) months regular salary or
retirement pension.
c. Credit information file/collateral
file. An NSSLA shall maintain as far as
practicable, a credit information file which
must contain, among other things, the
member-borrower’s application and
financial record. Other information relative
to the member-borrower, where
applicable, shall also be maintained which
must contain among other things, the
collateral and other documents pertinent
to the loan.
d. Loan approvals. Loans shall be
approved by the NSSLA’s board of trustees
or if approved by a body or officer/s duly
authorized by the board, such loan must
be confirmed by the board of trustees.
Manual of Regulations for Non-Bank Financial Institutions
§§ 4302S - 4305S.5
13.12.31
e. Loan agreements. For each loan
granted by an NSSLA, a promissory note
must be executed by the member-borrower
in favor of the NSSLA expressing such
particulars as the amount of the loan, date
granted, due date, interest rate and other
similar information.
f. Inscription of lien. In case of
mortgage loans, no release against an
approved loan shall be made before the
inscription of the mortgage.
Sec. 4303S Loan Proceeds. NSSLAs shall
in no case require member-borrowers to
deposit a portion of the loan proceeds,
whether in the form of savings or time
deposits. Where, subsequent to the release
of the loan proceeds, member-borrowers
open deposit accounts or make additional
deposits to their existing accounts, no part
of such new deposits shall be covered by a
stipulation prohibiting or limiting
withdrawal while new portion of their loans
are outstanding: Provided, however, That
this prohibition shall not apply in cases of
loans secured by a hold-out on deposits to
the extent of the unencumbered amount of
the deposit existing at the time of the filing
of the above-mentioned loan application.
Sec. 4304S Loan Repayment. The
treasurer, cashier or paymaster of the firm
employing a member-borrower shall be
required, pursuant to R.A. No. 8367, to
make deductions from the salary, wage,
income or retirement pension of the
member-borrower in accordance with the
terms of his loan, and all other deductions
authorized by the member-borrower, to
remit such deductions to the NSSLA
concerned and to collect such reasonable
fee for his services as may be authorized
by rules promulgated by the Monetary
Board.
Sec. 4305S Interest and Other Charges. The
following rules shall govern the rates of
interest and other charges on loans granted
by NSSLAs.
§§ 4305S.1 - 4305S.2 (Reserved)
§ 4305S.3 Interest in the absence of
stipulation. The rate of interest for the loan
or forbearance of any money, goods or
credit and the rate allowed in judgments, in
the absence of express contract as to such
rate of interest, shall be six percent (6%) per
annum.
(As amended by Circular No. 799 dated 21 June 2013)
§ 4305S.4 Escalation clause; when
allowable. Parties to an agreement
pertaining to a loan or forbearance of
money, goods or credits may stipulate
that the rate of interest agreed upon may
be increased in the event that the
applicable maximum rate of interest is
increased by the Monetary Board:
Provided, That such stipulations are
valid only if there is also a stipulation
in the agreement that the rate of interest
agreed upon shall be reduced in the
event that the applicable maximum rate
of interest is reduced by law or by the
Monetary Board: Provided, further, That
the adjustment in the rate of interest
agreed upon shall take effect on or after
the effectivity of the increase or decrease
in the maximum rate of interest.
§ 4305S.5 Interest accrual on past
due loans. NSSLAs shall not accrue
interest income on loans which are
already past due or on loan installments
which are in arrears, regardless of
whether the loans are secured or
unsecured. Interest on past due loans or
loan installments in arrears shall be taken
up as income only when actual payments
thereon are received.
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§§ 4305S.5 - 4306S.3
13.12.31
Interest income on past due loan arising
from discount amortization (and not from
the contractual interest of the account) shall
be accrued as provided in PAS 39.
(As amended by Circular No. 494 dated 20 September 2005)
§ 4305S.6 Method of computing
interest. NSSLAs shall only charge interest
based on the outstanding balance of a loan
at the beginning of an interest period.
For a loan where the principal is payable
in installments, interest per installment
period shall be calculated based on the
outstanding balance of the loan at the
beginning of each installment period.
Towards this end, all loan-related
documents shall show repayment schedules
in a manner consistent with this provision.
Marketing materials and presentations shall
likewise be consistent with this provision.
(Circular No. 754 dated 17 April 2012)
Sec. 4306S Past Due Accounts. Past due
accounts of an NSSLA shall, as a general
rule, refer to all accounts which are not paid
at maturity.
§ 4306S.1 Accounts considered past
due. The following shall be considered as
past due:
a. For loan or receivable payable on
demand not paid upon written demand as
required herein or within one (1) year from
date of grant or renewal, whichever comes
earlier.
NSSLAs shall, in case of non-payment
of a demand loan, make a written demand
within six (6) months following the grant
of such loan. The demand shall indicate a
period of payment which shall not be later
than six (6) months from date of said
demand.
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b. For loans or receivables payable on
installment, the outstanding balance of the
loan if a payment has fallen due and
remained unpaid;
c. In case of restructured loans as
defined in Sec. 4308S, the total outstanding
balance of the loan if a payment has fallen
due and remained unpaid; and
d. All items in litigation as defined in
the Manual of Accounts.
Past due accounts as defined herein are
considered non-performing loans (NPL).
(As amended by Circular No. 789 dated 28 February 2013)
§ 4306S.2 Extension/renewal of loans
(Transferrred to Section 4309S pursuant to Circular No. 789
dated 28 February 2013)
§4306S.3 Write-off of loans as bad
debts. To maximize the protection of
members of NSSLAs against misfeasance
and malfeasance of the trustees and officers
thereof, the Monetary Board adopted the
following regulations on writing-off of
loans by NSSLAs.
a. The term loan shall include all types
of credit accommodations granted to, and
advances made by the NSSLA for the
account of the borrowers/debtors,
including the interest thereon recorded in
the books.
b. Writing-off of loans by an NSSLA
shall be made not more than twice a year
by its board of trustees; and
c. Notice/application for write-off of
loans shall be submitted, in the prescribed
form to the appropriate department of the
SES at least thirty (30) days prior to the
intended date of write-off: Provided, That
no such loans with an aggregate outstanding
amount of P15,000 or more, as certified in
said notice/application, shall be written-off
without the prior approval of:
Manual of Regulations for Non-Bank Financial Institutions
§§ 4306S.3 - 4307S.1
12.12.31
(1) The Monetary Board, in case of
loans to trustees and officers of the
NSSLA, direct or indirect; or
(2) The head of the appropriate
department of the SES, subject to
confirmation by the Monetary Board, in case
of loans other than those mentioned in Item
“(1)” above.
§ 4306S.4 Updating of information
provided to credit information bureaus
NSSLAs which have provided adverse
information, such as the past due or
litigation status of loan accounts, to credit
information bureaus, or any organization
performing similar functions, shall submit
monthly reports to these bureaus or
organizations on the full payment or
settlement of the previously reported
accounts within five (5) business days from
the end of the month when such full
payment was received. For this purpose, it
shall be the responsibility of the reporting
NSSLAs to ensure that their disclosure of any
information about their borrowers/clients is
with the consent of borrowers concerned.
subsequent to the making of such sale
or contract;
(3) Any option, demand, lien, pledge,
or other claim against, or for delivery of,
property or money;
(4) Any purchase, or other acquisition
of, or any credit upon the security of any
obligation or claim arising out of any of
the foregoing; and
(5) Any transaction or series of
transactions having a similar purpose or
effect.
b. Tra n s a c t i o n s n o t c o v e r e d
Considering that the specific purpose of
the law is the full disclosure of the true
cost of credit, the following categories
of credit transactions are outside the
scope of the above regulations:
(1) Credit transactions which do not
involve the payment of any finance charge
by the debtor; and
(2) Credit transactions in which the
debtor is the one specifying a definite and
fixed set of credit terms such as bank
deposits, insurance contracts, sale of
bonds, etc.
(Circular No. 589 dated 18 December 2007)
Sec. 4307S “Truth in Lending Act”
Disclosure Requirements. NSSLAs are
required to strictly adhere to the
provisions of R. A. No. 3765, otherwise
known as the “Truth in Lending Act,”
and shall make the true and effective
cost of borrowing an integral part of
every loan contract.
a. Transactions covered
(1) Any loan, mortgage, deed of trust,
advance and discount;
(2) Any conditional sales contract,
any contract to sell, or sale or contract
of sale of property or services, either for
present or future delivery, under which,
part or all of the price is payable
§ 4307S.1 Definition of terms
a. Creditor (who shall furnish the
information) means any person engaged in
the business of extending credit (including
any person who as a regular business
practice makes loans or sells or rents
property or services on a time, credit, or
installment basis, either as principal or as
agent), who requires as an incident to the
extension of credit, the payment of a finance
charge.
The term creditor shall include, but shall
not be limited to, banks and banking
institutions, insurance and bonding
companies, savings and loan associations,
credit unions, financing companies,
installment houses, real estate dealers,
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§§ 4307S.1 - 4307S.2
12.12.31
lending investors, pawnshops, and any other
person or entity engaged in the business of
extending credit who requires as an incident
to the extension of credit, the payment of a
finance charge.
b. Person means any individual,
corporation, partnership, NSSLA, or other
organized group of persons, or the legal
successor or representative of the foregoing,
and includes the Philippine Government or
any agency thereof, or any other
government, or any of its political
subdivisions, or any agency of the foregoing.
c. Cash price or delivered price (in case
of trade transactions) is the amount of
money which would constitute full payment
upon delivery of the property (except money)
or service purchased at the creditor’s place
of business. In the case of financial
transactions, cash price represents the
amount of money received by the debtor
upon consummation of the credit
transaction, net of finance charges collected
at the time the credit is extended (if any).
d. Down payment represents the
amount paid by the debtor at the time of the
transaction in partial payment for the
property or service purchased.
e. Trade-in represents the value of an
asset, agreed upon by the creditor and
debtor, given at the time of the transaction
in partial payment for the property or service
purchased.
f. Non-finance charges correspond to
the amounts advanced by the creditor for
items normally associated with the ownership
of the property or of the availment of the service
purchased which are not incident to the
extension of credit. For example, in the case
of the purchase of an automobile on credit,
the creditor may advance the insurance
premium as well as the registration fee for
the account of the debtor.
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g. Amount to be financed consists of the
cash price plus non-finance charges less the
amount of the down payment and value of
the trade-in.
h. Finance charge includes interest, fees,
service charges, discounts, and such other
charges incident to the extension of credit.
i. Simple annual rate is the uniform
percentage which represents the ratio
between the finance charge and the amount
to be financed under the assumption that
the loan is payable in one (1) year with single
payment upon maturity and there are no upfront deductions to principal.
For loans with terms different from the
above assumptions, the effective annual
interest rate shall be calculated and
disclosed to the borrower as the relevant
true cost of the loan comparable to the
concept of simple annual rate.
For loans with contractual interest rates
stated on monthly basis, the effective interest
rate may be expressed as a monthly rate.
In accordance with the Philippine
Accounting Standards (PAS) definition,
effective interest rate is the rate that exactly
discounts estimated future cash flows
through the life of the loan to the net amount
of loan proceeds. For consistency,
methodology and standards for discounted
cash flow models shall be prescribed to be
used for the purpose.
(As amended by Circular No. 754 dated April 2012)
§ 4307S.2 Information to be disclosed
The following are the minimum information
required to be disclosed to NSSLA
borrowers (sample form in Appendix S-4):
a. The total amount to be financed;
b. The finance charges expressed in
terms of pesos and centavos;
c. The net proceeds of the loan; and
d. The percentage that the finance
charge bears to the total amount to be
Manual of Regulations for Non-Bank Financial Institutions
§§ 4307S.2 - 4308S
13.12.31
financed expressed as a simple annual rate
or an effective annual interest rate as
described in Item “h” of Subsec. 4307S.1.
Effective annual interest rate may also be
quoted as a monthly rate in parallel with
the quotation of the contractual rate.
NSSLAs are required to furnish each
borrower a copy of the disclosure statement,
prior to the consummation of the transaction.
(As amended by Circular No. 754 dated 17 April 2012 and
M-2012-018 dated 19 April 2012)
§ 4307S.3 Inspection of contracts
covering credit transactions. NSSLAs shall
keep in their office or place of business
copies of contracts covering all credit
transactions entered into by them which
involve the extension of credit to another
and the payment of finance charges therefor.
Such copies shall be available for inspection
or examination by the appropriate
department of the SES.
§ 4307S.4 (2008 – 4309S.4) Posters
NSSLAs shall post in conspicuous places
in their principal place of business and
branches, the information as contained in
the revised format of disclosure statement
(Appendix S-4). The posters shall include
an explicit notification that the disclosure
statement is a required attachment to the
loan contract and the customer has a right
to demand a copy of such disclosure.
(As amended by Circular No. 754 dated17 April 2012)
§4307S.5 Sanctions and penal
provisions. Non-compliance with any of the
provisions of this Section shall be
regarded at least as a less serious offense,
depending on the severity of nondisclosure, number of loans and amount
involved in the violation. In addition to
sanctions under R.A. No. 3765, the
following sanctions may be imposed:
a. First offense. Reprimand on the erring
officer/s;
b. Second offense. Reprimand on the
entire board of trustees; and
c. Subsequent offense/s:
i. Suspension of the erring officer/s and/
or entire board of trustees; and
ii. Restriction on lending activities.
This is without prejudice to other
penalties and sanctions provided under
Sections 36 and 37 of R.A. No. 7653.
(As amended by Circular No. 754 dated 17 April 2012)
Sec. 4308S Restructured Loans; General
Policy. Restructured loans are loans the
principal terms and conditions of which
have been modified for it not to become a
problem account, or if already past due, to
allow for a better settlement plan to fully
pay-off the loan. Restructured loans are
supported by a restructuring agreement
setting forth a new plan of payment or a
schedule of payment on a periodic basis.
The modification may include, but is not
limited to, change in maturity, installment
amortization, interest rate, collateral or
increase in the face amount of the debt
resulting from the capitalization of accrued
interest/accumulated charges.
Items in litigation and loans subject of
judicially-approved compromise, as well
as those covered by petitions for
suspensions or for new plans of payment
approved by the court or the SEC, shall not
be classified as restructured loans.
NSSLAs shall have the flexibility to
determine the basis for and terms of the loan
restructuring, considering, among other
things, the paying capacity of the
borrowers: Provided, That these shall at all
times be consistent with sound credit risk
management standards.
Loan restructuring shall be subject to the
approval of the board of trustees whose
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§§ 4308S - 4310S
13.12.31
resolution shall embody, among other
things:
1. basis of or justification for the
approval;
2. basis for the determination of the
borrower’s capacity to pay; and
3. nature and extent of protection of the
exposure.
The restructuring of loans granted to
trustees and/or officers of an NSSLA should
be upon terms not less favorable to the
Association than those offered to other
members.
In case of loans secured by real estate
collateral, such security shall be appraised
at the time of restructuring to ensure that
current market values are being used.
A second restructuring of a loan may be
allowed only if there are reasonable
justifications, and after the borrower has
paid at least twenty percent (20%) of the
principal obligation and updated the
payment of all interest accruing to the loan
as first restructured.
Restructured loans shall be classified
and provided with adequate allowance for
probable losses in accordance with
Appendix S-9.
(Circular No. 789 dated 28 February 2013)
Sec. 4309S (2012-4306S.2) Renewal of
Loans. Loans payable in periodic
installments may be renewed for the full or
beyond the amount of such loans but within
the limit prescribed under Subsec. 4301S.1b
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Part III - Page 8
or the NSSLA by-laws, as applicable:
Provided, That at least thirty percent (30%)
of the loan shall have been paid.
(As amended by Circular No. 789 dated 28 February 2013)
Sec. 4310S Minimum Required Disclosure
NSSLAs shall provide a table of the
applicable fees, penalties and interest rates
on loan transactions, including the period
covered by and the manner of and reason
for the imposition of such penalties, fees
and interests; fees and applicable conversion
reference rates for third currency
transactions, in plain sight and language,
on materials for marketing loans, such as
brochures, flyers, primers and advertising
materials, on loan application forms, and
on billing statements: Provided, That these
disclosures are in addition to the full
disclosure of the fees, charges and interest
rates in the terms and conditions of the loan
agreement found elsewhere on the
application form and billing statement:
Provided further, That such table of fees,
penalties and interest rates shall be printed
in plain language and in bold black letters
against a light or white background, and
using the minimum Arial 12 theme font and
size, or its equivalent in readability, and on
the first page, if the applicable document
has more than one (1) page.
Transitory provision: NSSLAs covered
in 4312N.12 - shall be given a period of
120 days from 6 January 2011 to fully
Manual of Regulations for Non-Bank Financial Institutions
§§ 4310S - 4312S
10.12.31
implement the required disclosure
requirements.
(Circular No. 702 dated 15 December 2010)
Sec. 4311S Unfair Collection Practices
NSSLAs, collection agencies, counsels and
other agents may resort to all reasonable and
legally permissible means to collect
amounts due them under the loan
agreement: Provided, That in the exercise
of their rights and performance of duties,
they must observe good faith and reasonable
conduct and refrain from engaging in
unscrupulous or untoward acts. Without
limiting the general application of the
foregoing, the following conduct is a
violation of this Section:
a. the use or threat of violence or other
criminal means to harm the physical person,
reputation, or property of any person;
b. the use of obscenities, insults, or
profane language which amount to a criminal
act or offense under applicable laws;
c. disclosure of the names of borrowers
who allegedly refuse to pay debts, except
as allowed under Subsec. 4312S;
d. threat to take any action that cannot
legally be taken;
e. communicating or threat to
communicate to any person credit
information which is known to be false,
application form and billing statement:
Provided further, That such table of fees,
penalties and interest rates shall be printed
including failure to communicate that a debt
is being disputed;
f. any false representation or deceptive
means to collect or attempt to collect any
debt or to obtain information concerning
borrower; and
g. making contact at unreasonable/
inconvenient times or hours which shall be
defined as contact before 6:00 A.M. or after
10:00 P.M., unless the account is past due
for more than sixty (60) days or the borrower
has given express permission or said times
are the only reasonable or convenient
opportunities for contact.
NSSLAs shall inform their borrower in
writing of the endorsement of the collection
of their account to a collection agency/agent,
or the endorsement of their account from
one collection agency/agent to another, at
least seven (7) days prior to the actual
endorsement. The notification shall include
the full name of the collection agency and
its contact details: Provided, That the
required notification in writing shall be
included in the terms and conditions of the
loan agreement. NSSLAs shall adopt policies
and procedures to ensure that personnel
handling the collection of accounts, whether
these are in-house collectors, or third-party
collection agents, shall disclose his/her full
name/true identity to the borrower.
(Circular No. 702 dated 15 December 2010)
Sec. 4312S Confidentiality of Information
NSSLAs shall keep strictly confidential the
data on the borrower or consumer, except
under the following circumstances:
a. disclosure of information is with the
consent of the borrower or consumer;
b. release, submission or exchange of
customer information with other financial
institutions, credit information bureaus,
lenders, their subsidiaries and affiliates;
c. upon orders of court of competent
jurisdiction or any government office or
agency authorized by law, or under such
conditions as may be prescribed by the
Monetary Board;
d. disclosure to collection agencies,
counsels and other agents of the NSSLA to
enforce its rights against the borrower;
e. disclosure to third party service
providers solely for the purpose of
assisting or rendering services to the
NSSLA in the administration of its lending
business; and
Manual of Regulations for Non-Bank Financial Institutions
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§§ 4312S-4356S
14.12.31
f. disclosure to third parties such as
insurance companies, solely for the purpose
of insuring the NSSLA from borrower default
or other credit loss, and the borrower from
fraud or unauthorized charges.
(Circular No. 702 dated 15 December 2010)
Sec. 4313S Sanctions. Violations of the
provisions of Secs. 4310S to 4312S shall be
subject to any or all of the following
sanctions depending upon their severity:
a. First offense. Reprimand for the
directors/officers responsible for the
violation;
b. Second offense. Disqualification of the
NSSLA concerned from the credit facilities of
the Bangko Sentral except as may be allowed
under Section 84 of R. A. No. 7653;
c. Subsequent offense/s:
i. Prohibition on the NSSLA concerned
from the extension of additional credit
accommodation against personal security;
and
ii. Penalties and sanctions provided
under Sections 36 and 37 of R. A. No. 7653.
(Circular No. 702 dated 15 December 2010)
Secs. 4314S – 4320S (Reserved)
B. SECURED LOANS
Sec. 4321S Kinds of Security. Loans by an
NSSLA may be secured by any or all of the
following:
a. Mortgages on registered real estate;
b. Chattel mortgages on harvested or
stored crops of non-perishable character;
c. Chattel mortgages on livestock, tools,
equipment or machinery, supplies or
materials, merchandise and other personal
properties;
d. Assignment of quedans which gives the
right of disposal of readily marketable products;
e. Time and/or savings deposits and/ or
capital contribution;
f. Pledge of bonds, stock and other
securities of GOCCs and other bonds, stocks
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Part III - Page 10
or securities which are non-speculative in
nature;
g. Land transfer certificates issued by the
government to tenant farmers, under the
agrarian reform program to the extent of sixty
percent (60%) of the value of the farm
holdings: Provided, That a certification shall
be first secured from the office of the Registry
of Deeds to the effect that the Land Transfer
Certificate being presented is valid; and
h. Other securities as may be approved
by the Monetary Board.
Secs. 4322S - 4335S (Reserved)
C. - D. (RESERVED)
Sec. 4336S (Reserved)
Sec. 4337S Salary Loans. The Bangko Sentral
shall promote the sustainable development of
consumer lending such as salary loans under
conditions of fair and sound credit practices.
(Circular No. 837 dated 18 June 2014)
§ 4337S.1 Definition of terms
a. Salary Loans. Unsecured loans,
granted to individuals on the basis of regular
salary, pension or other fixed compensation,
where repayment would come from such
future remunerations, either through salary
deduction, debit from the borrower’s
deposit account, over-the-counter payment
or other type of payment arrangement agreed
upon by the borrower and lender.
(Circular No. 837 dated 18 June 2014)
Secs. 4338S - 4355S (Reserved)
E. LOANS/CREDIT
ACCOMMODATIONS TO TRUSTEES,
OFFICERS, STOCKHOLDERS AND
THEIR RELATED INTERESTS
Sec. 4356S General Policy. The transactions
of all trustees or officers with the NSSLA
shall not be under terms more favorable than
those transacted with other members.
Manual of Regulations for Non-Bank Financial Institutions
§§ 4357S - 4391S.3
08.12.31
Sec. 4357S Direct/Indirect Borrowings;
Ceilings. No NSSLA shall directly or
indirectly make any loan to any trustee or
officer of such NSSLA, either for himself or
as agent or as partner of another, except
with the written approval of the majority of
the trustees of the NSSLA, excluding the
trustee concerned: Provided, That the
aggregate loans to such trustees and officers
shall not exceed twenty percent (20%) of
the total capital contributions of the NSSLA.
Sec. 4358S Records; Reports. In all cases
of accommodations granted to trustees and
officers under Sec. 4357S, the written
approval of the majority of the trustees of
the NSSLA, excluding the trustee concerned,
shall be entered upon the records of the
NSSLA and a copy of such entry shall be
transmitted forthwith to the appropriate
department of the SES within twenty (20)
business days from the date of approval.
Secs. 4359S - 4369S (Reserved)
Sec. 4370S Sanctions. The office of any
trustee or officer of an NSSLA who violates
the provisions of these rules on
accommodations granted to trustee and
officers shall immediately become vacant and
said trustees or officer shall be punished by
imprisonment of not more than one (1) year
nor more than ten (10) years and by a fine of
not less than P5,000 nor more than P50,000
pursuant to Section 15 of R.A. No. 8367.
F. - I. (RESERVED)
Secs. 4371S - 4390S (Reserved)
J. OTHER OPERATIONS
Sec. 4391S Fund Investments. An NSSLA
may invest its funds in any or all of the
following:
a. In bonds and securities in an aggregate
amount not exceeding ten percent(10%) of its
total assets; any investment in excess of ten
percent (10%) shall require the prior approval
of the Bangko Sentral: Provided, That NSSLAs
may invest available funds in excess of ten
percent (10%) of total assets in sound nonspeculative enterprise, particularly in readily
marketable and high grade commercial papers,
bonds and securities issued by the
Government of the Philippines or any of its
political subsidiaries, instrumentalities or
corporations including GOCCs, subject to the
following conditions:
(1) The credit needs of the members
shall be served/satisfied first;
(2) The investment in any one (1)
corporation (excluding the Government of
the Philippines, any of its political
subdivisions, instrumentalities, or
corporations including GOCCs), shall not
exceed twenty-five percent (25%) of the
NSSLA's combined capital accounts; and
(3) The additional investment may be
up to another ten percent (10%) of the
NSSLA’s total assets;
b. In real property, in an aggregate amount
not exceeding at any one time five percent (5%)
of the total assets of such NSSLA; and
c. In furniture, fixtures, furnishings and
equipment, and leasehold improvements for
its offices, in amount not exceeding at any
one time ten percent (10%), of its total
capital contribution.
§§ 4391S.1 - 4391S.2 (Reserved)
§ 4391S.3 Investments in debt and
marketable equity securities. The
classification, accounting procedures,
valuation, sales and transfers of investments
in debt securities and marketable equity
securities shall be in accordance with the
guidelines in Appendices Q-20 and Q-20a.
Penalties and sanctions. The following
penalties and sanctions shall be imposed
on FIs and concerned officers found to
violate the provisions of these regulations:
Manual of Regulations for Non-Bank Financial Institutions
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§§ 4391S.3-4399S
13.12.31
a. Fines of P2,000/banking day to be
imposed on NSSLAs for each violation,
reckoned from the date the violation was
committed up to the date it was corrected;
and
b. Sanctions to be imposed on
concerned officers:
(1) First offense – reprimand the officers
responsible for the violation; and
(2) Subsequent offenses–suspension- of
ninety (90) days without pay for officers
responsible for the violation.
(Circular No. 476 dated 16 February 2005 as amended by Circular
Nos. 628 dated 31 October 2008 and 626 dated 23 October
2008)
§§ 4391S.4 - 4391S.10 (Reserved)
Sec. 4392S Loan Portfolio and Other Risk
Assets Review System. To ensure that timely
and adequate management action is taken
to maintain the quality of the loan portfolio
and other risk assets, and that adequate loss
reserves are set-up and maintained at a level
sufficient to absorb the loss inherent in the
loan accounts and other risk assets, each
NSSLA shall establish a system of identifying
and monitoring existing or potential problem
loans and other risk assets, and of evaluating
credit and asset management policies vis-avis prevailing circumstances and emerging
portfolio trends.
The board of trustees is responsible for
ensuring that the NSSLA has, at a minimum:
a. A robust risk management that shall
S Regulations
Part III - Page 12
include, at least, an independent and
periodic review of quality of risk assets.
b. Controls in place, and policies and
procedures to determine the adequacy of
booked allowance for probable losses on
loans and other risk assets, consistent with
the Philippine Accounting Standards and
the minimum standards required in
Appendix S-9. The allowance for losses
required in the said appendix shall likewise
be set-up immediately; and
c. A robust process to ensure that the
board of trustees is informed of the results
of independent and periodic reviews, and
determination of adequacy of booked loss
reserves, and that appropriate actions on
such reports are undertaken consistent with
the specific duties and responsibilities of the
board of trustees as provided under Subsec.
4141S.5.a(7).
(Circular No. 789 dated 28 February 2013)
Secs. 4393S - 4395S (Reserved)
K. MISCELLANEOUS PROVISIONS
Secs. 4396S - 4398S (Reserved)
Sec. 4399S General Provision on Sanctions
Unless otherwise provided, any violation
of the provisions of this Part shall be subject
to the sanctions provided in Sections 34,
35, 36 and 37 of R.A. No. 7653, whenever
applicable.
Manual of Regulations for Non-Bank Financial Institutions
§§4401S - 4401S.2
14.12.31
PART FOUR
BSP REGULATIONS ON FINANCIAL CONSUMER PROTECTION
A. CONSUMER PROTECTION
OVERSIGHT FUNCTION
Section 4401S Consumer Protection
Oversight Function. The Board of Directors
(Board) of BSFIs is ultimately responsible in
ensuring that consumer protection practices
are embedded in the BSFI’s business
operations. BSFIs must adhere to the highest
service standards and embrace a culture of
fair and responsible dealings in the conduct
of their business through the adoption of a
BSFI’s Financial Consumer Protection
Framework that is appropriate to the BSFI’s
corporate structure, operations, and risk
profile. The BSFI’s Financial Consumer
Protection Framework shall be embodied in
its Board-approved Financial Consumer
Protection Manual.
(Circular No. 857 dated 21 November 2014)
§4401S.1 Role and responsibility of the
board and senior management. The
board and senior management are
responsible for developing the BSFI’s
consumer protection strategy and
establishing an effective oversight over the
BSFI’s consumer protection programs. The
Board shall be primarily responsible for
approving
and
overseeing
the
implementation of the BSFI’s consumer
protection policies as well as the
mechanism to ensure compliance with said
policies. While senior management is
responsible for the implementation of the
consumer protection policies approved by
the Board, the latter shall be responsible for
monitoring and overseeing the performance
of senior management in managing the day
to day consumer protection activities of the
BSFI. The Board may also delegate other
duties and responsibilities to senior
management and/or Committees created for
the purpose but not the function of
overseeing compliance with the
BSP-prescribed Consumer Protection
Framework and the BSFI’s own Consumer
Protection Framework.
(Circular No. 857 dated 21 November 2014)
§4401S.2 Consumer Protection Risk
Management
System
(CPRMS)
All BSFIs, regardless of size, should have a
CPRMS that is part of the corporate-wide
Risk Management System. The CPRMS is a
means by which a BSFI identifies, measures,
monitors, and controls consumer protection
risks inherent in its operations. These
include both risks to the financial consumer
and the BSFI. The CPRMS should be directly
proportionate to the BSFI’s asset size,
structure, and complexity of operation. A
carefully devised, implemented, and
monitored CPRMS provides the foundation
for ensuring an BSFI’s adherence to
consumer protection standards of conduct
and compliance with consumer protection
laws, rules and regulations, thus ensuring
that the BSFI’s consumer protection practices
address and prevent identified risks to the
BSFI and associated risk of financial harm
or loss to consumers.
a. Board and senior management
oversight. The Board is responsible for
developing and maintaining a sound CPRMS
that is integrated into the overall framework
for the entire product and service life-cycle.
The Board and Senior Management should
periodically review the effectiveness of the
CPRMS, including how findings are reported
and whether the audit mechanisms in place
Manual of Regulations for Non-Bank Financial Institutions
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§ 4401S.2
14.12.31
enable adequate oversight. The quality and
timeliness of the information provided to the
Board and Senior Management regarding
the BSFI’s CPRMS are especially important
for assessing the program’s effectiveness.
The Board and Senior Management must
also ensure that sufficient resources have
been devoted to the program. The ability to
achieve the consumer protection objectives
depends, in large part, on the authority and
independence of the individuals directly
responsible for implementing the CPRMS
and for performing audit/review activities,
and the support provided by the Board and
Senior Management. The Board and Senior
Management must also make certain that
CPRMS weaknesses are addressed and
corrective actions are taken in a timely
manner.
b. Compliance program. A Consumer
Protection Compliance Program is an essential
component of the CPRMS. The BSFIs should
establish a formal, written Consumer
Protection Compliance Program that is part of
the over-all Compliance System and should
be in accordance with the Revised Compliance
Framework for Banks under Sec. 4180Q.
A well planned, implemented, and maintained
Consumer Protection Compliance Program
should prevent or reduce regulatory violations
and protect consumers from non-compliance
and associated harms or loss.
c. Policies and procedures. An
effective CPRMS should have consumer
protection policies and procedures in place,
approved by the Board. A comprehensive
and fully implemented policies help to
communicate the board’s and senior
management’s commitment to compliance
as well as expectations. Overall, policies
and procedures should a) be consistent with
Consumer Protection policies approved by
the Board; b) ensure that consumer
protection practices are embedded in the
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Part IV - Page 2
BSFI’s business operations; 3) address
compliance with consumer protection laws,
rules, and regulations; and 4) reviewed
periodically and kept-to-date as it serve as
reference for employees in their day-to-day
activities.
d. Internal
audit
function
Independent of the compliance function, the
BSFI’s Audit Function should review its
consumer protection practices, adherence
to internal policies and procedures, and
compliance with existing laws, rules and
regulations. The BSFI’s internal audit of the
different business units/functions should
include the consumer protection audit
program. A well-designed and implemented
consumer protection audit program ensures
that the Board or its designated Committee
shall be able to make an assessment on the
effectiveness of implementation as well as
adequacy of approved policies and
standards in meeting the established
consumer protection objectives.
e. Training. Continuing education of
personnel about consumer protection laws,
rules and regulations as well as related bank
policies and procedures is essential to
maintaining a sound consumer protection
compliance program. BSFIs should ensure
that all relevant personnel, specifically those
whose roles and responsibilities have
customer interface, receive specific and
comprehensive training that reinforces and
helps implement written policies and
procedures on consumer protection. The
BSFI should institute a consumer protection
training program that is appropriate to its
organization structure and the activities it
engages. The training program should be
able to address changes in consumer
protection laws, rules and regulations and
to policies and procedures and should be
provided in a timely manner.
(Circular No. 857 dated 21 November 2014)
Manual of Regulations for Non-Bank Financial Institutions
§§4402S - 4402S.1
14.12.31
B. CONSUMER PROTECTION
STANDARDS OF CONDUCT FOR BSFIS
Sec. 4402S Consumer Protection
Standards. The following consumer
protection standards reflect the core
principles, which BSFIs are expected to
observe at all times in their dealings with
financial consumers. These should be
embedded into the corporate culture of the
BSFI, enhancing further its defined
governance framework while addressing
conflicts that are inimical to the interests of
the financial consumer.
(Circular No. 857 dated 21 November 2014)
§4402S.1 Disclosure and transparency
BSFIs must take affirmative action to ensure
that their consumers have a reasonable
holistic understanding of the products and
services, which they may be acquiring or
availing. In this context, full disclosure and
utmost transparency are the critical elements
that empower the consumer to make
informed financial decisions. This is made
possible by providing the consumer with
ready access to information that accurately
represents the nature and structure of the
product or service, its terms and conditions,
as well as its fundamental benefits and risks.
The BSFI demonstrates the competencies
required of this principle if it complies with
the following:
a. Key information
(1) Ensures that offering documents of
products and services contain the
information necessary for customers to be
able to make an informed judgment of the
product or service and, in particular, meet
the full disclosure requirements specified
under existing laws or regulations. All key
features and risks of the products should be
highlighted prominently in a succinct
manner. Where a product is being offered
on a continuous basis, its offering
documents should be updated in
accordance with the requirements set out
in the regulations.
(2) Readily and consistently makes
available to the customer a written copy of
the terms and conditions (T&C) that apply
to a product or service. The contents of the
T&C must be fully disclosed and explained
to financial customers before initiating a
transaction. Where and when warranted,
reference to the T&C should be made while
transacting with the consumer and before
consummating the transaction, if such
reference is material to the understanding
of the consumer of the nature of the product
or service, as well as its benefits and risks.
As a written document, the T&C must
be complete but concise, easily
understandable, accurate, and presented in
a manner that facilitates the consumer’s
comprehension. The latter is taken to mean
that the text of the document should be
according to Subsec. 4320Q.4 (Amended
Regulations to Enhance Consumer
Protection in the Credit Card Operations of
Banks and Their Subsidiary or Affiliate
Credit Card Companies).
The T&C should include at least the
following:
(a) The full price or cost to the customer
including all interest, fees, charges, and
penalties. The T&C must clearly state
whether interest, fees, charges, and
penalties can change over time. The method
for computing said interest, fees, charges,
and penalties shall be presented in
accordance with Subsec. 4305S.6;
(b) General information about the
operation of the products or services
including the customer’s obligations and
liabilities;
(c) Cooling-off period, if applicable;
(d) Cancellation, return and exchange
policies, and any related cost;
(e) The actions and remedies which the
BSFI may take in the event of a default by
the customer;
Manual of Regulations for Non-Bank Financial Institutions
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§ 4402S.1
14.12.31
(f) Procedures to report unauthorized
transactions and other contingencies, as well
as the liabilities of parties in such case; and
(g) A summary of the BSFI’s complaints
handling procedure.
(3) Advises customers to read and
understand the applicable T&C, when
considering a product or service.
(4) Ensures that its staff communicates
in such a manner that clients can understand
the terms of the contract, their rights and
obligations. Staff should communicate with
techniques that address literacy limitations
(e.g., materials are available in local language).
(5) Provides customers adequate time to
review the T&C of the product or service,
asks questions and receives additional
information prior to signing contracts or
executing the transaction. The staff of the
BSFI should be available to answer the
questions and clarifications from the
financial customer.
(6) Ensures that staff assigned to deal
directly with customers, or who prepare
advertisement materials (or other material
of the BSFI for external distribution) or who
markets any product or service should be
fully knowledgeable about these products
and services, including statutory and
regulatory requirements, and are able to
explain the nuances to the consumer.
(7) Uses a variety of communication
channels to disclose clear and accurate
information. Such communication channels
should be available to the public without
need for special access requirements, which
may entail additional expense.
Communication channels should be
sufficiently responsive to address the literacy
limitations of the financial consumer. Said
channels may be written and/or verbal as
may be warranted.
(8) Discloses pricing information in
public domains (e.g., websites).
(9) Updates customers with relevant
information, free of charge in a clear,
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Part IV - Page 4
understandable, comprehensive, and
transparent manner, for the duration of the
contract. Such information covers the
characteristics and the risks of the
products sold by the BSFI and their
authorized agents.
(10) Imparts targeted information to the
specific groups of clients to whom specific
products are being marketed, with a
particular consideration for vulnerable
customers. Communication channels
employed for such targeted marketing
initiatives may be accordingly calibrated.
(11) Offers enhanced disclosure for
more complex products, highlighting the
costs and risks involved for the customer.
For structured investment products, a
Product Highlight Sheet (PHS) is required.
The PHS should be clear, concise, and
easily understandable by individual
customers. It should contain information
that empowers the customer to appreciate
the key features of the product and its risks.
It is prepared in a format that facilitates
comparison with other products. The PHS
should be available at no cost to the public
and made available to consumers upon
request. Before signing any contract, the
BSFI should ensure that the customer has
freely signed a statement to the effect that
the customer has duly received, read, and
understood the PHS.
(12) Notifies the customer in writing of
any change in:
(a) Interest rate to be paid or charged
on any account of the customer as soon as
possible; and
(b) A non-interest charge on any account
of the customer within a number of days as
provided under existing regulations prior to
the effective date of the change.
If the revised terms are not acceptable
to the customer, he or she should have the
right to exit the contract without penalty,
provided such right is exercised within a
reasonable period. The customer should
Manual of Regulations for Non-Bank Financial Institutions
§§4402S.1 - 4402S.2
14.12.31
be informed of this right whenever a notice
of change is made.
(13) Provides customers with a proof of
the transaction immediately after the
transaction has been completed. The
customer should be given a hard copy of
each of the documents signed by the clients
(including, but not limited to, the contract)
with all terms and conditions. The BSFI
ensures that documents signed by the
customer are completely filled and that there
are no blank terms.
(14) Regularly provides customers with
clear and accurate information regarding
their accounts (e.g., Statement of accounts
that includes, among others, covering
period, opening balance/value of
transactions, all kinds of interest, fees and
charges, closing balance, inquiries for
outstanding balances, proof of payments for
loans).
(15) Informs customers of their rights
and responsibilities including their right to
complain and the manner of its submission.
b. Advertising and promotional
materials
(1) Ensures that advertising and
marketing materials do not make false,
misleading, or deceptive statements that
may materially and/or adversely affect the
decision of the customer to avail of a service
or acquire a product.
(2) Ensures that advertising and
promotional materials are easily readable
and understandable by the general public.
It should disclose clear, accurate, updated,
and relevant information about the product
or service. It should be balanced/
proportional (reflecting both advantages and
risks of the product or service); visible/
audible; key information is prominent and
not obscured; print is of sufficient size and
clearly legible.
(3) Ensures that promotional materials
are targeted according to the specific groups
of consumers to whom products are
marketed and the communication channels
employed for marketing financial services.
(4) Ensures that all advertising and
promotional materials disclose the fact that
it is a regulated entity and that the name and
contact details of the regulator are indicated.
c. Conflict of interest
(1) Discloses properly to the consumer
prior to the execution of the transaction that
the BSFI or its staff has an interest in a direct/
cross transaction with a consumer.
(2) Discloses the limited availability of
products to consumers when the BSFI only
recommends products which are issued by
their related companies, particularly when
commissions or rebates are the primary
basis for recommending the particular
product to consumers.
(3) Discloses the basis on which the
BSFI is remunerated at the pre-contractual
stage.
(4) Ensures that adequate systems and
controls are in place to promptly identify
issues and matters that may be detrimental
to a customer’s interest (e.g., cases in which
advice may have been given merely to meet
sales targets, or may be driven by financial
or other incentives).
(Circular No. 857 dated 21 November 2014)
§4402S.2 Protection of client
information. Financial consumers have the
right to expect that their financial
transactions, as well as relevant personal
information disclosed in the course of a
transaction, are kept confidential. Towards
this end, BSFIs must ensure that they have
well-articulated information security
guidelines, well-defined protocols, a
secured database, and periodically
re-validated procedures in handling the
personal information of their financial
consumers. This should be an end-to-end
process that should cover, among others,
the array of information that will be
pre-identified and collected, the purpose of
gathering each information, how these will be
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§ 4402S.2
14.12.31
sourced from the client, the IT-security
infrastructure of the BSFI, and the protocols
for disclosure, both within the BSFI and
especially to third parties.
The BSFI demonstrates the ability to
protect client information if it is able to:
a. Confidentiality and security of client
information
(1) Have a written privacy policy to
safeguard its customers’ personal
information. This policy should govern the
gathering, processing, use, distribution,
storage, and eventual disposal of client
information. The BSFI should ensure that
privacy policies and sanctions for violations
are implemented and strictly enforced.
(2) Ensure that privacy policies are
regularly communicated throughout the
organization. Opportunities include
employees’ initial training sessions, regular
organization-wide training programs,
employee handbooks, posters and posted
signs, company intranet and internet
websites, and brochures available to
clients.
(3) Have appropriate systems in place
to protect the confidentiality and security of
the personal data of its customers against
any threat or hazard to the security or
integrity of the information and against
unauthorized access. This includes a
written information security plan that
describes its program to protect customer
personal information. The plan must be
appropriate to its size and complexity, nature
and scope of its activities, and the sensitivity
of customer information it handles. As part
of its plan, the BSFI must:
(a) Designate employee accountable to
coordinate its Information Security Program.
(b) Identify and assess the risks to
customer information in each relevant area
of the BSFI operation, and evaluate the
effectiveness of the current safeguards for
controlling these risks.
(c) Design and implement a safeguards
program, and regularly monitor and test it.
S Regulations
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(d) Select service providers that can
maintain appropriate safeguards.
(e) Evaluate and adjust the program in
light of relevant circumstances, including
changes in the firm’s business or operations,
or the results of security testing and
monitoring.
(4) Have appropriate policies and
practices for employee management and
training to assess and address the risks to
customer information. These include:
(a) Checking references and doing
background checks before hiring employees
who will have access to customer
information.
(b) Asking new employees to sign an
agreement to follow BSFI confidentiality and
security standards for handling customer
information.
(c) Limiting access to customer
information to employees who have a
business reason to see it.
(d) Controlling access to sensitive
information by requiring employees to use
“strong” passwords that must be changed
on a regular basis.
(e) Using automatic time-out or log-off
controls to lock employee computers after
a period of inactivity.
(f) Training employees to take basic
steps to maintain the security,
confidentiality, and integrity of customer
information. These may include locking
rooms and file cabinets where records are
kept; ensuring that employee passwords are
not posted in work areas; encrypting
sensitive customer information when
transmitted electronically via public
networks; referring calls or other requests
for customer information to designated
individuals who have been trained in how
BSFI safeguards personal data; and reporting
suspicious attempts to obtain customer
information to designated personnel.
(g) Regularly reminding all employees
of company policy to keep customer
information secured and confidential.
Manual of Regulations for Non-Bank Financial Institutions
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14.12.31
(h) Imposing strong disciplinary
measures for security policy violations.
(i) Preventing terminated employees
from accessing customer information by
immediately deactivating their passwords
and user names and taking other measures.
(5) Have a strong IT System in place to
protect the confidentiality, security,
accuracy, and integrity of customer’s
personal information. This includes
network and software design, and
information
processing,
storage,
transmission, retrieval, and disposal.
Maintaining security throughout the lifecycle of customer information, from data
entry to disposal, includes:
(a) Knowing where sensitive customer
information is stored and storing it securely.
Make sure only authorized employees have
access.
(b) Taking steps to ensure the secure
transmission of customer information.
(c) Disposing customer information in
a secure way.
(d) Maintaining up-to-date and
appropriate programs and controls to
prevent unauthorized access.
(e) Using appropriate oversight or audit
procedures to detect the improper disclosure
or theft of customer information.
(f) Having a security breach response
plan in the event the BSFI experiences a data
breach.
b. Sharing of customer information
(1) Inform its customers in writing and
explain clearly to customers as to how it
will use and share the customer’s personal
information.
(2) Obtain the customers’ written
consent, unless in situations allowed as an
exception by law or BSP-issued regulations
on confidentiality of customer’s information,
before sharing customers’ personal
information with third parties such as credit
bureau, collection agencies, marketing and
promotional partners, and other relevant
external parties.
(3) Provide access to customers to the
information shared and should allow
customers to challenge the accuracy and
completeness of the information and have
these amended as appropriate.
(4) Appropriate penalties should be
imposed by the BSFI to erring employees
for exposing or revealing client data to third
parties without prior written consent from
client.
(Circular No. 857 dated 21 November 2014)
§4402S.3 Fair treatment. Fair treatment
ensures that financial consumers are treated
fairly, honestly, professionally and are not
sold inappropriate and harmful financial
products and services. BSFIs should ensure
they have the necessary resources and
procedures in place, internal monitoring,
and control mechanisms, for safeguarding
the best interest of their customers. These
include general rules, such as those
addressing ethical staff behavior, acceptable
selling practices as well as regulating
products and practices where customers are
more likely to be offered services that are
inappropriate for their circumstances.
The BSFI demonstrates the principle of
fair treatment towards financial consumers
if it is able to:
a. Affordability and suitability of
product or service
(1) When making a recommendation to
a consumer:
(a) Gather, file, and record sufficient
information from the customer to enable the
BSFI to offer an appropriate product or
service to the customer. The information
gathered should be commensurate to the
nature and complexity of the product or
service either being proposed to or sought
by the customer and should enable the BSFI
to provide an appropriate level of
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§ 4402S.3
14.12.31
professional service. As a minimum,
information includes the customers’
financial knowledge and experience,
financial capabilities, investment objectives,
time horizons, needs, priorities, risk
affordability, and risk profile.
(b) Offer products or services that are
in line with the needs/risk profile of the
consumer. The BSFI should provide for and
allow the customer to choose from a range
of available products and services that can
meet his needs and requirements. Sufficient
and right information on the product or
service should enable the customer to select
the most suitable and affordable product or
service.
(2) Inform or warn the customers that
if they do not provide sufficient information
regarding their financial knowledge and
experience, the BSFI is not in a position to
accurately determine whether the product
or service is appropriate to them, given the
limited information available. This
information or warning may be provided in
a standardized format.
(3) Ensure that the customer certifies in
writing the accuracy of the personal
information provided.
(4) Ensure to offer market-based pricing.
(5) Design products that are appropriate
to the varying needs and interests of different
types of consumers, particularly the more
vulnerable consumers. Adequate product
approval should be in place. Processes
should be proper to ensure that products and
services are fit for the targeted consumer.
(6) Do not engage in abusive or
deceptive acts or practices.
(7) Seek customer feedback for product
design and delivery and use this feedback
to enhance product development and
improve existing products. Likewise,
investigate reasons for client drop out.
S Regulations
Part IV - Page 8
(8) Do not use high pressure/aggressive
sales techniques and do not force clients to
sign contracts.
(9) Have a system in place for approval
when selling high-risk instruments to
consumers.
b. Prevention of over-indebtedness
(1) Have appropriate policies for good
repayment capacity analysis. The loan
approval does not rely solely on guarantees
(co-signers or collateral) as a substitute for
good capacity analysis.
(2) Properly assess the creditworthiness
and conduct appropriate client repayment
capacity analysis when offering a new credit
product or service significantly increasing
the amount of debt assumed by the customer.
(3) Ensure to have an appropriate
system in place for credit analysis and
decisions including appropriate criteria to
limit the amount of credit.
(4) Monitor enforcement of policies to
prevent over-indebtedness. The Board and
Senior Management of the BSFIs should be
aware of and concerned about the risks of
over-indebtedness of its customers.
(5) Draw the customer’s attention to
the consequences of signing a contract that
may affect his financial position and his
collateral in case of default in payment of a
loan/obligation.
(6) Prepare and submit appropriate
reports (e.g., loan quality, write-offs,
restructured loans) to management.
(7) Ensure that corrective measures are
in place for poor long-term quality of loan
portfolio linked to over-indebtedness.
(8) Have specific procedures to actively
work out solutions (i.e., through workout
plan) for restructured loans/refinancing/
writing-off on exceptional basis for clients
in default who have the “willingness” but
without the capacity to repay, prior to
seizing the assets.
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c. Cooling-off period
(1) As may be appropriate, provide the
customer with a “cooling-off” period of a
reasonable number of days (at least two (2)
banking days) immediately following the
signing of any agreement or contract,
particularly for financial products or services
with a long-term savings component or
those subject to high pressure sales
contracts.
(2) Permit the customer to cancel or
treat the agreement as null and void without
penalty to the customer of any kind on his
or her written notice to the BSFI during the
cooling-off period. The BSFI may however
collect or recover reasonable amount of
processing fees. It is further recognized that
there may be a need for some qualification
to an automatic right of cooling off. For
example, the right should not apply where
there has been a drawdown of a credit
facility and a BSFI should be able to recover
any loss arising from an early withdrawal
of a fixed rate term deposit which loss arises
because of a difference in interest rates. This
would be in addition to any reasonable
administrative fees associated with closure
of the term deposit.
d. Objectivity
(1) Deal fairly, honestly, and in good
faith with customers and avoid making
statements that are untrue or omitting
information which are necessary to prevent
the statement from being false or misleading.
(2) Present a balanced view when
selling a product or service. While the BSFI
highlights the advantages of a product/
service, the customer’s attention should also
be drawn to its disadvantages and downside
risks.
(3) Ensure that recommendations made
to customer are clearly justified and
explained to the customer and are properly
documented. If the requested products are
of higher risk rating than a customer’s risk
tolerance assessment results, the BSFI should
draw to the customer’s attention that the
product may not be suitable for him in view
of the risk mismatch. In such instances, there
should be a written disclosure of
consequences which is accepted by the
client.
(4) Ensure that the customer’s
suitability and affordability are assessed
against specific risks of the investment
products:
(a) Financial Needs Analysis (FNA) and
Client Suitability - to assess the customer’s
risk profile and suitability of the product.
(b) Customer’s Declaration Form - to
confirm his acceptance and understanding
of the highlighted features of the product.
(c) FNA, Client Suitability and
Declaration Form should be duly completed
to make sure that the product sold is
suitable and affordable for the customer.
e. Institutional culture of fair and
responsible treatment of clients
(1) There should be a Code of Conduct
(Code) applicable to all staff, spelling out
the organizational values and standards of
professional conduct that uphold protection
of customers. This Code should be reviewed
and approved by the Board. The staff signs
a document by which they acknowledge that
they will abide by the Code and not engage
in the behaviors prohibited as provided for
in the Code. To ensure adherence to the
Code, the BSFI is required to implement
measures to determine whether the
principles of consumer protection are
observed, the clients’ concerns are
appropriately addressed and problems are
resolved in a timely manner. These may
include among others, the regular conduct
of customer satisfaction survey.
(2) Ensure that recruitment and training
policies are aligned around fair and
responsible treatment of clients.
(3) Ensure that staff, specifically those
who interact directly with customers,
receive adequate training suitable for the
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§ 4402S.3 - 4402S.4
14.12.31
complexity of the products or services they
sell.
(4) Ensure that collection practices are
covered during the initial training of all staff
involved in collections (loan officers,
collections staff, and branch managers). In
particular, collection staff should receive
training in acceptable debt collection
practices and loan recovery procedures.
(5) Strictly comply with BSP’s existing
regulation on what constitutes unfair debt
collection practices. The BSFI’s Code of
Conduct should clearly spell out the specific
standards of professional conduct that are
expected of all staff involved in collection
(including outsourced staff).
(6) Institute policy that guarantees that
clients receive a fair price for any foreclosed
assets and has procedures to ensure that
collateral seizing is respectful of clients’
rights.
(7) Ensure that Managers and Supervisors
review ethical behavior, professional
conduct, and quality of interaction with
customers as part of staff performance
evaluations.
(8) Have a system or internal processes
in place to detect and respond to customer
mistreatment as well as serious infractions.
In case of violation of Code of Conduct (e.g.,
harassment), sanctions shall be enforced.
(9) Inform staff of penalties for noncompliance with Code of Conduct.
(10) Perform appropriate due diligence
before selecting the authorized agents/
outsourced parties (such as taking into
account
the
agents’
integrity,
professionalism, financial soundness,
operational capability and capacity, and
compatibility with the FI’s corporate culture)
and implement controls to monitor the
agents’ performance on a continuous basis.
The BSFI retains ultimate accountability for
outsourced activities.
(11) Disseminate the main aspect of the
Code of Conduct to clients through printed
media or other appropriate means.
S Regulations
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f. Remuneration Structure
(1) Design remuneration structure for
staff of BSFI and authorized agents in a
manner that encourages responsible
business conduct, fair treatment and
avoidance/mitigation of conflicts of interest.
(2) Disclose to the customers the
remuneration structure where appropriate,
such as when potential conflicts of interest
cannot be managed or avoided.
(3) Ensure adequate procedures and
controls so that sales staff are not
remunerated based solely on sales
performance but that other factors, including
customer’s satisfaction (in terms of number
of customer complaints served/settled) and
compliance with regulatory requirements,
best practices guidelines, and Code of
Conduct in which certain principles are
related to best interest of customers,
satisfactory audit/compliance review results
and complaint investigation results, are
taken into account.
(Circular No. 857 dated 21 November 2014)
§4402S.4 Effective Recourse. Financial
consumers should be provided with
accessible, affordable, independent, fair,
accountable, timely, and efficient means for
resolving complaints with their financial
transactions. BSFIs should have in place
mechanisms for complaint handling and
redress.
The BSFI demonstrates the ability to
provide effective recourse if it is able to:
a. Establish an effective Consumer
Assistance Management System (CAMS).
Appendix S-10 provides for the minimum
requirements of an effective CAMS.
b. Develop internal policies and
practices, including time for processing,
complaint response, and customer access.
c. Maintain an up-to-date log and
records of all complaints from customers
subject to the complaints procedure. This
log must contain the following:
(1) Details of each complaint;
Manual of Regulations for Non-Bank Financial Institutions
§§ 4402S.4 - 4402S.5
14.12.31
(2) The date the complaint was received;
(3) A summary of the BSFI’s response;
(4) Details of any other relevant
correspondence or records;
(5) The action taken to resolve each
complaint; and
(6) The date the complaint was resolved.
d. Ensure that information on how to
make a complaint is clearly visible in the
BSFI’s premises and on their websites.
e. Undertake an analysis of the patterns
of complaints from customers on a regular
basis including investigating whether
complaints indicate an isolated issue or a
more widespread issue for consumers. This
analysis of consumer complaints must be
escalated to the BSFI’s compliance/risk
management function and senior
management.
f. Provide for adequate resources to
handle financial consumer complaints
efficiently and effectively. Staff handling
complaints should have appropriate
experience, knowledge, and expertise.
Depending on the BSFI’s size and
complexity of operation, a Senior staff
member should be appointed to be in
charge of the complaint handling process.
(Circular No. 857 dated 21 November 2014)
§4402S.5 Financial education and
awareness. Financial education initiatives
give consumers the knowledge, skills, and
confidence to understand and evaluate the
information they receive and empower them
to make informed financial decisions.
Because BSFIs deal directly with financial
consumers, they have the reach, expertise,
and established relationships necessary to
deliver financial education. Financial
education should be integral to the good
governance of the BSFIs.
The BSFI demonstrates this principle
through various means and in particular:
a. Have a clear and defined financial
education and awareness program as part
of a wider financial consumer protection
and education strategy and corporate
governance. It is an integral component of
the BSFI’s ongoing interaction and
relationship with clients. Dedicated and
adequate resources should be provided for
the financial education initiatives.
b. Develop financial education and
awareness programs, either on their own
or in partnership or collaboration with
industry associations, which contribute to
the improvement of their clients’ knowledge
and understanding of their rights and
responsibilities, basic information and risks
of financial products and services, and
ability to make informed financial decisions
and participate in economic activities.
Financial education programs should be
designed to meet the needs and financial
literacy level of target audiences, as well as
those that will reflect how target audience
prefers to receive financial information.
These may include:
(1) Delivering public awareness
campaigns and information resources that
would teach consumers on certain aspects
of their financial lives particularly, budgeting,
financial planning, saving, investing,
borrowing, retirement planning, and selfprotection against fraud.
(2) Developing financial education tools
or information materials that are updated
and readily understood and transparent such
as customized advice and guidance (face to
face training); printed brochures, flyers,
posters, training videos (e.g., about money
management, debt management, saving),
and newsletters; websites, and interactive
calculators that deliver key messages and
“call to action” concerning better money
management (e.g., protect your money,
know your product, read and understand
the T&C, check your statements, pay credit
card bills on time, safeguard your Personal
Identification Number, understand fees and
charges) and consumer responsibility to ask
the right questions.
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§§ 4402S.5 - 4403S
14.12.31
(3) Distributing to customers, at the point
of sale, a pamphlet on questions, which
customers need to ask before accepting a
financial product or service.
c. Clearly distinguish between financial
education from commercial advice. Any
financial advice for business purposes
should be transparent. Disclose clearly any
commercial nature where it is also being
promoted as a financial education initiative.
It should train staff on financial education
and develop codes of conduct for the
provision of general advice about
investments and borrowings, not linked to
the supply of a specific product.
d. Provide via the internet or through
printed publications unbiased and
independent information to consumers
through comparative information about the
price and other key features, benefits and
risks, and associated fees and charges of
products and services.
e. Regularly track, monitor, and assess
campaigns and programs and use the results
of the evaluation for continuous improvement.
(Circular No. 857 dated 21 November 2014)
C. ENFORCEMENT ACTIONS
Section 4403S Enforcement Actions
a. Enforcement is the implementation
of corrective measures and imposition of
sanctions to BSFIs to:
(1) Ensure compliance with the BSP
regulations on consumer protection and
consumer protection laws and regulations;
(2) Inform the management of the BSFIs
of the consequences of their decisions and
actions;
(3) Instill discipline to the BSFIs; and
(4) Serve as deterrent to the commission
of violations.
b. The bases for enforcement actions are
the results of the:
(1) On-site consumer protection
framework assessment;
(2) Off-site surveillance;
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(3) Market monitoring; and
(4) Bangko Sentral Consumer Assistance
Mechanism
c. The following enforcement action
may be taken depending on:
(1) Rating-based enforcement actions for
on-site periodic assessment. To implement
the foregoing enforcement actions, the
following rules shall apply:
(a) A Consumer Protection Rating (CPR)
of 4 will require no enforcement action.
(b) A CPR of 3 will require issuance of
a written reminder on consumer protection
areas that may lead to weaknesses in the
BSFI’s Consumer Protection Framework.
(c) A CPR of 2 will require a written
Action Plan in response to the written
reminder issued by the BSP. The written
Action Plan shall be duly approved by the
Board. It shall aim to correct the identified
weaknesses in the BSFI’s Consumer
Protection Framework or the noted
violations of the BSP Regulations on
Consumer Protection. FCPD shall assess the
viability of the plan and shall monitor the
BSFI’s performance.
(d) A CPR of 1 shall also be considered
as poor/grossly inadequate Financial
Consumer Protection Framework. For this
reason, a written action plan fully
executable within ninety (90) days shall be
prepared. The action plan shall be duly
approved by the Board aimed at instituting
immediate and strong measures to restore
the BSFI to acceptable consumer protection
operating condition, where it does not pose
any risk of financial loss or harm to the
financial consumers.
In the event of non-submission of the
written Action Plan within the deadline or
failure to implement its action plan, FCPD
shall recommend appropriate enforcement
actions on the BSFI and its responsible
officers including monetary penalties to be
computed on a daily basis until
improvements
are
satisfactorily
implemented.
Manual of Regulations for Non-Bank Financial Institutions
§§ 4403S - 4499S
14.12.31
Numerical
Rating
Adjectival
Rating
Supervisory
Approach
Enforcement
Action
4
Composite Rating
3
Strong
Acceptable
No cause for
supervisory
concern
Minimal
supervisory
concern
None
Written
reminder
2
1
Marginal
More than
normal
supervisory
concern
Written action
plan
Poor
Immediate and
close supervisory
attention and
monitoring
Written action plan
Suspension of
introduction of
new products and
services or
suspension of
existing
products/services
that poses a
consumer
protection concern
or suspension of
further
distribution or
Issuance of
consumer products
and services
Table No. 2. Enforcement Actions for Consumer Protection Ratings
d. Enforcement actions for violations of consumer protection regulations
Depending on the seriousness and impact of the breaches of Bangko Sentral Regulations on
consumer protection and specific consumer protection rules and regulations, the following
administrative sanctions shall be imposed:
Administrative sanctions Whenever applicable, the following administrative sanctions
shall be imposed:
· Fines in amount as may be determined by the
Monetary Board to be appropriate;
·Stopping/suspending operations/products or restricting
approval of new operations/products;
·Requiring the withdrawal/modification of advertising/
marketing materials; and
·Requiring submission of additional reports for monitoring.
Table No. 3. Administrative Sanctions for Violations of Consumer
Protection Regulations.
(Circular No. 857 dated 21 November 2014)
Secs. 4404S - 4499S (Reserved)
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08.12.31
PART FIVE
Sections 4501S - 4599S (Reserved)
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§§ 4601S - 4601S.1
09.12.31
PART SIX
MISCELLANEOUS
A. OTHER OPERATIONS
Section 4601S Fines and Other Charges. The
following regulations shall govern
imposition of monetary penalties on
NSSLAs, their trustees and/or officers and
payment of such penalties or fines and other
charges by NSSLAs.
(As amended by Circualr No. 585 dated 15 October 2007)
§ 4601S.1 Guidelines on the imposition
of monetary penalties; payment of penalties
or fines. The following are the guidelines
on the imposition of monetary penalties on
NSSLAs, their trustees and/or officers and
the payment of such penalties or fines and
other charges:
a. Definition of terms. For purposes of
the imposition of monetary penalties, the
following definitions are adopted:
(1) Continuing offenses/violations are
acts, ommisions or transactions entered
into, in violation of laws, BSP rules and
regulations, Monetary Board directives,
and orders of the Governor which persist
from the time the particular acts were
committed or omitted or the transactions
were entered into until the same were
corrected/rectified by subsequent acts or
transactions. They shall be penalized on
a per calendar day basis from the time the
acts were committed/omitted or the
transactions were effected up to the time
they were corrected/rectified.
(2) Transactional offenses/violations are
acts, omissions or transactions entered into
in violation of laws, BSP rules and
regulations, Monetary Board directives, and
orders of the Governor which cannot be
corrected/rectified by subsuquent acts or
transactions. They shall be meted with one
(1)-time monetary penalty on a per
transaction basis.
(3) Continuing penalty refers to the
monetary penalty imposed on continuing
offenses/violations on a per calendar day
basis reckoned from the time the offense/
violation occurred or was committed until
the same was corrected/rectified.
(4) Transactional penalty refers to a
one (1)-time penalty imposed on a
transactional offense/violation.
b. Basis for the computation of the
period or duration of penalty. The
computation of the period or duration of all
penalties shall be based on calendar days.
For this purpose the terms “per banking
day”, “per business day”, “per day”
and/or “a day” as used in this Manual, and
other BSP rules and regulations shall mean
“per calendar day” and/or “calendar day”
as the case may be.
c. Additional charge for late payment
of monetary penalty. Late payment of
monetary penalty shall be subject to an
additional charge of six percent (6%) per
annum to be reckoned from the business
day immediately following the day said
penalty becomes due and payable up to the
day of actual payment.
d. Appeal or request for reconsideration.
A one (1)-time appeal or request for
reconsideration on the monetary penalty
approved by the Governor/Monetary Board
to be imposed on the NSSLA, its directors
and/or officers shall be allowed: Provided,
That the same is filed with the appropriate
department of the SES within fifteen (15)
calendar days from receipt of the Statement
of Account/billing letter. The appropriate
department of the SES shall evaluate the
appeal or request for reconsideration of
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09.12.31
the NSSLA/individual and make
recommendations thereon within thirty (30)
calendar days from receipt thereof. The
appeal or request for reconsideration on the
monetary penalty approved by the
Governor/Monetary Board shall be elevated
to the Monetary Board for resolution/
decision. The running of the penalty period
in case of continuing penalty and/or the
period for computing additonal charge shall
be interrupted from the time the appeal or
request for reconsideration was received by
the appropriate department of the SES up to
the time that the notice of the Monetary
Board decision was received by the NSSLA/
individual concerned.
e. Due date; payment of penalty or
fines. The penalty approved by the
Governor/MB to be imposed on the NSSLA,
its directors and/or officers shall become due
and payable fifteen (15) calendar days from
receipt of the Statement of Account from the
BSP. For NSSLAs which maintain DDA with
the BSP, penalties which remain unpaid after
the lapse of the fifteen-day period shall be
automatically debited against their
corresponding DDA on the following
business day without additional charge. If
the balance of the concerned NSSLA’s DDA
is insufficient to cover the amount of the
penalty, said penalty shall already be subject
to an additional charge of six percent (6%)
per annum to be reckoned from the business
day immediately following the end of said
fifteen (15)-day period up to the day of actual
payment.
Failure to settle the full amount of the
fines within the period or on the day
prescribed herein shall, in addition to the
additonal penalty as provided in item “c”
above, make an NSSLA, its trustees and
officers liable to the sanctions imposed
under Sec. 4199S.
(As amended by Circular Nos. 662 dated 09 September 2009 and
585 dated 15 October 2007)
Secs. 4602S - 4630S (Reserved)
S Regulations
Part VI - Page 2
Sec. 4631S Revocation/Suspension of
Non-Stock Savings and Loan Association
License. In reference to Section 22 of
R.A. No. 8367 or the “Revised Non-Stock
Savings and Loan Association Act of 1997”,
the Monetary Board, upon due notice and
hearing, has the authority to either revoke
or suspend the license of any NSSLA for
such period as it deems necessary, based
on any of the following grounds:
a. Suspension of license:
(1) Repeated violations [uncorrected
similar examination findings for the last two
(2) examinations, regular or special] of any
of the provisions of R.A. No. 8367, and/or
any rules or regulations promulgated to
implement said law, or BSP directives
and/or instructions; and
(2) Paid-up capital is impaired by
continuing losses for the last two (2) fiscal
years.
Lifting of the suspension of license shall
be approved by the Monetary Board upon
recommendation of the appropriate BSP
supervising department.
b. Revocation of license:
(1) When the solvency of the NSSLA is
imperiled by losses and irregularities;
(2) When the NSSLA willfully violates
any provision of R.A. No. 8367, any rule or
regulation promulgated to implement said
law and BSP directives and/or instructions;
(3) When the NSSLA is conducting
business in an unsafe and unsound manner;
(4) When it is unable to pay its
liabilities as they become due in the ordinary
course of business;
(5) When it has insufficient realizable
assets, as determined by the BSP, to meet
its liabilities;
(6) When it cannot continue in
business without involving probable losses
to its members or creditors; and
(7) When it has willfully violated a cease
and desist order of the Monetary Board
involving acts or transactions which amount to
fraud or a dissipation of assets of the institution.
Manual of Regulations for Non-Bank Financial Institutions
§§ 4631S - 4642S.2
09.12.31
As to the effects of the revocation/
suspension of license of the NSSLA, the
NSSLA is prohibited from engaging in the
business of accumulating the savings of its
members and using such accumulations for
loans to its members, subject to applicable
sanctions and penalties provided by law in
case of violation thereof. After the cessation
of its operations due to revocation of its
license, the NSSLA should proceed with its
dissolution, in acccordance with the
provisions under the Corporation Code. The
dissolution of a corporation involves the
termination of its corporate existence, at
least, as far as the right to go on doing
ordinary business is concerned, and the
winding up of its affairs, the payments of
its debts and distribution of its assets among
the members or stakeholders or other
persons involved. The board of trustees of
the corporation also has the option of
adopting a plan for the distribution of its
assets, as stated under Section 95 of the
Corporation Code.
After the revocation/suspension of its
license, the Monetary Board may direct the
board of trustees of the NSSLA to proceed
with the voluntary dissolution of the
corporation. In the event that the board of
trustees refuses to effectuate such
dissolution, the Monetary Board may refer
the matter to the Solicitor General for the
filing of a quo warranto case against the
corporation in accordance with the
provisions of the Corporation Code.
Secs. 4632S - 4640S (Reserved)
Sec. 4641S Electronic Services. The
guidelines concerning electronic activities,
as may be applicable, are found in Sec.
4701Q and its Subsections.
(Circular No. 649 dated 09 March 2009)
Sec. 4642S Issuance and Operations of
Electronic Money. The following guidelines
shall govern the issuance of electronic
money (e-money) and the operations of
electronic money issuers (EMIs).
(Circular No. 649 dated 09 March 2009)
§ 4642S.1 Declaration of policy. It is
the policy of the BSP to foster the
development of efficient and convenient
retail payment and fund transfer mechanism
in the Philippines. The availability and
acceptance of e-money as a retail payment
medium will be promoted by providing the
necessary safeguards and controls to
mitigate the risks associated in an e-money
business.
(Circular No. 649 dated 09 March 2009)
§ 4642S.2 Definitions
E-money shall mean monetary value as
represented by a claim on its issuer, that is a. electronically stored in an
instrument or device;
b. issued against receipt of funds of an
amount not lesser in value than the
monetary value issued;
c. accepted as a means of payment
by persons or entities other than the
issuer;
d. withdrawable in cash or cash
equivalent; and
e. issued in accordance with this
Section.
Electronic money issuer shall be
classified as follows:
a. Banks (hereinafter called EMIBank);
b. NBFI supervised by the BSP
(hereinafter called EMI-NBFI); and
c. Non-bank institutions registered
with the BSP as a money transfer agent
under Sec. 4511N of the MORNBFI
(hereinafter called EMI-Others).
For purposes of this Section:
a. Electronic instruments or devices
shall mean cash cards, e-wallets accessible
via mobile phones or other access device,
stored value cards, and other similar
products.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part VI - Page 3
§§ 4642S.2 - 4642S.4
09.12.31
b. E-money issued by NSSLAs shall
not be considered as deposits.
(Circular No. 649 dated 09 March 2009)
§ 4642S.3 Prior Bangko Sentral approval
NSSLAs planning to be an EMI-NBFI shall
comply with the requirements of Sec. 4641S
and with Sec. 4190Q, when applicable.
(Circular No. 649 dated 09 March 2009)
§ 4642S.4 Common provisions. The
following provisions are applicable to all
EMIs:
a. E-money instrument issued shall be
subject to aggregate monthly load limit of
P100,000 unless a higher amount has been
approved by the BSP. In case an EMI issues
several e-money instruments to a person (emoney holder), the total amount loaded in
all the e-money instruments shall be
consolidated in determining compliance
with the aggregate monthly load limit;
b. EMIs shall put in place a system to
maintain accurate and complete record of
e-money instruments issued, the identity of
e-money holders, and the individual and
consolidated balances thereof. The system
must have the capability to monitor the
movement of e-money transactions and link
e-money instruments issued to common
e-money holders. The susceptibility of a
system to intentional or unintentional
misreporting of transaction and balances
shall be sufficient ground for imposition by
the BSP of sanctions, as may be applicable.
c. E-money may only be redeemed at
face value. It shall not earn interest nor rewards
and other similar incentives convertible to
cash, nor be purchased at a discount.
E-money is not considered a deposit, hence,
it is not insured with the PDIC.
d. EMIs shall not ensure that e-money
instruments clearly identify the issuer who
is ultimately responsible to the e-money
holders. This shall be communicated to the
client who shall acknowledge the same in
writing.
S Regulations
Part VI - Page 4
e. It is the responsibility of EMIs to
ensure that their distributors/e-money agents
comply with all applicable requirements of
the Anti-Money Laundering laws, rules and
regulations.
f. EMIs shall provide an acceptable
redress mechanism to address the
complaints of its customers.
g. EMIs shall disclose in writing and its
customers shall signify agreement to the
information embodied in Item “c” above upon
their participation in the e-money system. In
addition, it shall provide clear guidance in
English and Filipino on consumers’ right of
redemption, including conditions and fees for
redemption, if any. Information on available
redress procedures for complaints together
with the address and contact information of
the issuer shall also be provided.
h. Prior to the issuance of e-money,
EMIs should ensure that the following
minimum systems and controls are in place:
(1) Sound and prudent management,
administrative and accounting procedures
and adequate internal control mechanisms;
(2) Properly-designed computer
systems which are thoroughly tested prior
to implementation;
(3) Appropriate security policies and
measures intended to safeguard the integrity,
authenticity and confidentiality of data and
operating processes;
(4) Adequate business continuity and
disaster recovery plan; and
(5) Effective audit function to provide
periodic review of the security control
environment and critical systems.
i. EMIs shall provide the SDC
quarterly statements containing, among
others, information on investments,
volume of transactions, total outstanding
e-money balances, and liquid assets in
such forms as may be prescribed later on.
j. EMIs shall notify the BSP in writing
of any change or enhancement in the
e-money facility thirty (30) days prior to
implementation. If said change or
Manual of Regulations for Non-Bank Financial Institutions
§§ 4642S.4 - 4642S.11
10.12.31
enhancement requires prior Bangko Sentral
approval, the same shall be evaluated
accordingly. Any change or enhancement
that shall expand the scope or change the
nature of the e-money instrument shall be
subject to prior approval of the Deputy
Governor, SES. These changes or
enhancements may include the following:
(1) Additional capabilities of the
e-money instrument/s, like access to new
channels (e.g., inclusion of internet
channel in addition to merchant Point of
Sale terminals);
(2) Change in technology service
providers and other major partners in the
e-money business (excluding partner
merchants), if any; and
(3) Other changes or enhancements.
(Circular No. 649 dated 09 March 2009)
§ 4642S.5 Quasi-bank license
requirement. EMI-NBFIs and EMI-Others that
engage in lending activities must secure a
quasi-banking license from the Bangko Sentral.
(Circular No. 649 dated 09 March 2009)
§ 4642S.6 Sanctions. Monetary
penalties and other sanctions for the
following violations committed by EMINBFIs shall be imposed:
Nature of Violation/
Exception
1. Issuing e-money
without prior Bangko
Sentral approval
2. Violation of any
of the provisions of
R.A. No. 9160 (AntiMoney Laundering
Law of 2001 as
amended by R.A.
No. 9194) and its
implementing rules
and regulations
Sanction/Penalties
Applicable penalties
under Sections 36 &
37 of R.A. No. 7653;
Watchlisting of
owners/partners/
principal officers
Applicable penalties
prescribed under
the Act
Nature of Violation/
Exception
3. Violation/s of
this Section
Sanction/Penalties
Penalties and sanctions
under the
abovementioned laws
and other applicable
laws, rules and
regulations
In addition, the susceptibility of a
system to intentional or unintentional
misreporting of transactions and balances
shall be sufficient ground for appropriate
Bangko Sentral action or imposition of
sanctions, whenever applicable.
(Circular No. 649 dated 09 March 2009)
§ 4642S.7 Transitory provisions
EMI-NBFIs granted authority to issue
e-money prior to 26 March 2009 may
continue to exercise such authority:
Provided, That it shall submit to the
Bangko Sentral, within one (1) month
from 26 March 2009 a certification
signed by the President or Officer with
equivalent rank and function that it is
in compliance with all the applicable
requirements of this Section.
Otherwise, they are required to submit
within the same period the measures
they will undertake, with the
corresponding timelines, to conform to
the provisions that they have not
complied with, subject to Bangko
Sentral approval.
(Circular No. 649 dated 09 March 2009)
§§ 4642S.8 - 4642S.10 (Reserved)
§ 4642S.11 Outsourcing of services
by Electronic Money Issuers (EMIs) to
Electronic Money Network Service
Providers (EMNSP). The guidelines on
outsourcing of services by Electronic
Money Issuers (EMIs) to Electronic Money
Network Service Providers (EMNSP) are
shown in Appendix Q-55.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part VI - Page 5
§§ 4642S.11 - 4655S
14.12.31
Sanctions. Violations committed by
EMIs pertaining to outsourcing activities to
EMNSP shall be subject to monetary
penalties as graduated under Appendix
Q-39 and/or other non-monetary sanctions
under Section 37 of RA No. 7653.
Transitory provisions. EMIs that were
granted an authority to outsource their emoney activities to an EMNSP may continue
to exercise such authority provided that they
have to conform to the provisions of
Appendix Q-55 within a six (6)-month period
from 20 January 2011.
(Circular 704 dated 22 December 2010)
Secs. 4643S - 4649S (Reserved)
Sec. 4650S Philippine and Foreign Currency
Notes and Coins. The rules and regulations
that shall govern the treatment and disposition
of counterfeit Philippine and foreign currency
notes and coins, the reproduction and/or use
of facsimiles of legal tender Philippine
currency notes and coins, the replacement and
redemption of legal tender Philippine currency
notes and coins considered mutilated or unfit
for circulation, and the treatment and
disposition of Philippine currency notes and
coins called in for replacement are provided
in Section 4950Q.
(Circular No. 829 dated 13 March 2014, M-2009-021 dated
16 June 2009)
B. SUNDRY PROVISIONS
of the Bangko Sentral: Provided, however, That
in the case of NSSLAs under examination, the
head of the appropriate department of the SES
may furnish findings of examination to the office
or firm where such NSSLAs do business.
All deposits of whatever nature with
NSSLAs are considered absolutely
confidential in nature, and may not be
examined, inquired or looked into by any
person, government official, bureau or
office, except upon written permission of
the depositor, or in cases of impeachment,
or upon order of competent court in cases
of bribery or dereliction of duty of public officials
or in cases where the money deposited or
invested is the subject matter of litigation.
No official or employee of NSSLAs shall
disclose to any person any information
concerning said deposits, except in cases
mentioned in the preceding paragraph. Any
official or employee of NSSLAs who violates
this Section shall be punished under R.A.
No. 1405, as amended.
Sec. 4653S Examination by the Bangko
Sentral. The head of the appropriate
department of the SES, personally or by
deputy, shall make at least once a year and
at such other times as he or the Monetary
Board may deem necessary and expedient,
an examination, inspection or investigation
of the books and records, business affairs,
administration and financial condition of
NSSLAs.
Sec. 4651S Notice of Dissolution
NSSLAs contemplating to dissolve shall give
written notice thereof to the Monetary Board
through the appropriate department of the SES
at least thirty (30) days before taking steps to
effect dissolution.
Sec. 4654S Applicability of Other Rules
Other rules and regulations applicable to
the examination of thrift banks, insofar as
they are applicable and not inconsistent with
these rules shall apply to NSSLAs.
Sec. 4652S Confidential Information
No trustee, officer or employee of NSSLAs
or of the Bangko Sentral shall disclose any
information relating to member-borrowers and
their applications or to the operations of the
NSSLAs unless permitted by the Monetary Board
Sec. 4655S Annual Supervisory Fees
The prescribed rate of annual supervisory fees
for an NSSLA, beginning assessable year 2012
shall be one-sixty-fifth of one percent (1/65 of
1%) of its Average Assessable Assets (AAA) of
the immediately preceding year but shall not
exceed the maximum amount provided below:
S Regulations
Part VI - Page 6
Manual of Regulations for Non-Bank Financial Institutions
§§ 4655S - 4657S.9
13.12.31
Total AAA of
NSSLA
>P1.0 billion
>P750.0
million - P1.0
billion
>P500.0
million P750.0 million
>P250.0
million P500.0 million
>P100.0
million P250.0 million
Up to P100.0
million
Maximum
Amount of
Annual Fees
P500,000.00
P400,000.00
P200,000.00
P100,000.00
Sec. 4657S Non-Stock Savings and Loan
Associations Premises and Other Fixed
Assets. The following rules shall govern
the premises and other fixed assets of
NSSLAs.
§ 4657S.1 Accounting for non-stock
savings and loans associations premises;
other fixed assets. NSSLAs premises,
furniture, fixture and equipment shall be
accounted for using the cost model under
PAS 16 "Property, Plant and Equipment".
(Circular No. 494 dated 20 September 2005)
P 50,000.00
P 10,000.00
Provided, That the minimum amount of
annual fees of NSSLAs with AAA of up to
P100.0 million shall be P10,000.00.
The annual supervisory fee shall be
payable within thirty (30) days from receipt
of the billing statement from the Bangko
Sentral. Failure to pay the annual fee within
the prescribed period shall subject the
NSSLA to administrative sanctions.
For purposes of computing the annual
supervisory fees, AAA shall be the
summation of end-of-quarter total
assessable assets (end-of-quarter total assets
per balance sheet, after deducting cash on
hand and amounts due from banks) divided
by the number of quarters in operation
during the particular assessment period.
(As amended by Circular No. 789 dated 28 February 2013)
Sec. 4656S Basic Law Governing NonStock Savings and Loan Associations
R.A. No. 8367, as amended, also known
as the "Revised Non-Stock Savings and
Loan Association Act of 1997", regulates
the organization and operation of NSSLAs.
§ 4657S.2 (Reserved)
§ 4657S.3 Reclassification of real and
other properties acquired as non-stock
savings and loans association premises
Real and Other Properties Acquired (ROPA)
reclassified either as Real Property- Land or
Real Property-Building shall be booked at
their ROPA balance, net of any valuation
reserves: Provided, That only such acquired
asset or a portion thereof that will be
immediately used or earmarked for future
use may be reclassified and booked as Real
Property-Land/Building.
NSSLAs, prior to the reclassification of
their ROPA accounts to Real Property-Land/
Building, shall first secure prior Bangko
Sentral approval before effecting the
reclassification and shall submit, in case of
future use, justification and plans for
expansion/use.
§§ 4657S.4 - 4657S.8 (Reserved)
§ 4657S.9 Batas Pambansa Blg. 344 An Act to Enhance the Mobility of Disabled
Persons by Requiring Certain Buildings,
Institutions, Establishments and Public
Utilities to Install Facilities and Other
Devices. In order to promote the realization
of the rights of disabled persons to
participate fully in the social life and the
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part VI - Page 7
§§ 4657S.9 - 4660S
13.12.31
development of the societies in which they
live and the enjoyment of the opportunities
available to other citizens, no license or
permit for the construction, repair or
renovation of public and private buildings
for public use, educational institutions,
airports, sports and recreation centers and
complexes, shopping centers or
establishments, public parking places,
workplaces, public utilities, shall be granted
or issued unless the owner or operator
thereof shall install and incorporate in such
building, establishment or public utility,
such architectural facilities or structural
features as shall reasonably enhance the
mobility of disabled persons such as
sidewalks, ramps, railings, and the like. If
feasible, all such existing buildings,
institutions, establishments, or public
utilities may be renovated or altered to
enable the disabled persons to have access
to them.
§ 4657S.10. Republic Act No. 9994 –
An Act Granting Additional Benefits and
Privileges to Senior Citizens, Further
Amending Republic Act No. 7432 of 1992,
as Amended by Republic Act No. 9257 of
2003. To be able to give full support to the
improvement of the total well-being of the
elderly and their full participation in society,
and to motivate and encourage them to
contribute to nation building, senior citizens
shall be provided with express lanes in all
branches and offices of NSSLAs. If the
provision of express lanes is logistically
impossible in any particular branch or office
of any NSSLA, said branch or office shall
ensure that senior citizens are accorded
priority service. The provision of express
lanes and/or priority service shall be made
known to the general public through a
clearly written notice prominently displayed
S Regulations
Part VI - Page 8
in the transaction counters of all NSSLA
branches and/or offices.
(Circular No. 805 dated 08 August 2013)
Secs. 4658S - 4659S (Reserved)
Sec. 4660S Disclosure of Remittance
Charges and Other Relevant Information
It is the policy of the Bangko Sentral to
promote the efficient delivery of
competitively-priced remittance services by
banks and other remittance service providers
by promoting competition and the use of
innovative payment systems, strengthening
the financial infrastructure, enhancing
access to formal remittance channels in the
source and destination countries, deepening
the financial literacy of consumers, and
improving transparency in remittance
transactions, consistent with sound
practices.
Towards this end, NBFIs under Bangko
Sentral supervision, including FXDs/MCs
and RAs, providing overseas remittance
services shall disclose to the remittance
sender and to the recipient/beneficiary, the
following minimum items of information
regarding remittance transactions, as
defined herein:
a. Transfer/remittance fee - charge for
processing/sending the remittance from the
country of origin to the country of
destination and/or charge for receiving the
remittance at the country of destination;
b. Exchange rate - rate of conversion
from foreign currency to local currency, e.g.,
peso-dollar rate;
c. Exchange rate differential/spread foreign exchange mark-up or the difference
between the prevailing Bangko Sentral
reference/guiding rate and the exchange/
conversion rate;
d. Other currency conversion charges -
Manual of Regulations for Non-Bank Financial Institutions
§§ 4660S - 4699S
13.12.31
commisions or service fees, if any;
e. Other related charges - e.g.,
surcharges, postage, text message or
telegram;
f. Amount/currency paid out in the
recipient country - exact amount of money
the recipient should receive in local currency
or foreign currency; and
g. Delivery time to recipients/
beneficiaries - delivery period of remittance
to beneficiary stated in number of days,
hours or minutes.
Non-bank remittance service providers
shall likewise post said information in their
respective websites and display them
prominently in conspicuous places within
their premises and/or remittance/service
centers.
No. 9160, as amended, or of this Section,
the officer(s) or other persons responsible
for such violation shall be punished by a
fine of not less than P50 thousand nor more
than P200 thousand or by imprisonment of
not less than two (2) years nor more than
ten (10) years, or both, at the discretion of
the court pursuant to Section 36 of R.A. No.
7653, otherwise known as “The New
Central Bank Act”.
b. Without prejudice to the criminal
sanctions prescribed above against the
culpable persons, the Monetary Board may,
at its discretion, impose upon any covered
institution, its directors and/or officers for
any violation of Section 9 of R.A. No. 9160,
as amended, the administrative sanctions
provided under Section 37 of R.A. No. 7653.
(Circular No. 534 dated 26 June 2006)
Secs. 4661S - 4690S (Reserved)
Sec. 4691S Anti-Money Laundering
Regulations. Covered institutions, including
their subsidiaries and affiliates, shall comply
with the provisions of Part 8 of
Q Regulations, R.A. No. 9160 (Anti-Money
Laundering Act of 2001), as amended, and
its IRR.
(As amended by Circular Nos. 706 dated 05 January 2011,
661 dated 01 September 2009 and 612 dated 13 June 2008)
§§ 4691S.1 - 4691S.8 (Reserved)
§ 4691S.9 Sanctions and penalties
a. Whenever a covered institution
violates the provisions of Section 9 of R.A.
Secs. 4692S - 4694S (Reserved)
Sec. 4695S Valid Identification Cards for
Financial Transactions. The provisions of
Part 8 of the Q Regulations on valid
identification documents shall apply.
(Circular No. 564 dated 03 April 2007, as amended by Circular
Nos. 792 dated 03 May 2013, 706 dated 05 January 2011,
657 dated 16 June 2009 and 608 dated 20 May 2008)
Secs. 4696S - 4698S (Reserved)
Sec. 4699S General Provision on Sanctions
Unless otherwise provided, any violation
of the provisions of this Part shall be subject
to the sanctions provided in Sections 34,
35, 36 and 37 of R. A. No. 7653, whenever
applicable.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Part VI - Page 9
APP. S-1
08.12.31
SAFEGUARDS IN BONDING OF NSSLA ACCOUNTABLE
OFFICERS AND EMPLOYEES
(Appendix to Sec. 4145S)
1. The Teller. He should not be
allowed to accumulate more than a specific
maximum amount to be determined by the
association but in no case to exceed
P10,000 in cash at any given time while in
the performance of his duties. The
procedures in this regard are as follows:
a. Cash. All cash in excess of the
maximum amount determined by the
association shall be turned over to the
cashier. When deposits received by a teller
will increase his cash in excess of the
maximum limit, the teller shall
immediately make a cash turn-over of, at
least, the excess. Thus, although his
transactions during the day may total more
than the maximum limit, the amount of
money directly in his custody at any given
time will never exceed the limit.
b. Checks and Other Cash Items
(COCIs). All COCIs received by a teller
should be stamped as “non-negotiable.”
The stamping should be made diagonally
on the face of the check. Thus, all checks
that are received by the tellers lose their
further negotiability. There should,
however, be an agreement with the
association’s depository banks whereby
they will accept for deposit only to the
account of the association the COCI
previously stamped by the tellers as “nonnegotiable.” Therefore, only the association
and nobody else can further negotiate these
checks, and only the association’s
depository bank will accept them and
solely for deposit to its account. Thus, even
in the remote possibility that someone
presents a COCI stolen from the association
to one of its depository banks, it will not be
accepted for encashment.
2. The COCIs Clerk. In view of the
fact that all COCIs received by the tellers
are stamped “non-negotiable” as detailed
above, the COCIs clerk who records and
processes these checks carries no
accountabilities whatsoever. From the
moment that a check is received up to the
moment that it is deposited to the account
of the association with one of its depository
banks, that check is just a piece of paper to
be processed and recorded. It will only
reassume its negotiability upon its receipt
by the association’s depository bank. In
cases, however, where checks are
received by mail, the COCIs clerk shall be
charged with the duty of stamping the
checks as “non-negotiable.”
3. As an added precautionary
measure, the manager/accountant/loan
officer should check from time to time
whether all COCIs received are stamped
“non-negotiable.” In the event that a COCI
is not so stamped and it results in financial
loss on the part of the association, the
employee charged with the duty to stamp
and who failed to do so, shall be held
personally responsible, together with the
manager/accountant/loan officer, for the loss.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-I - Page 1
APP. S-2
14.12.31
LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATIONS
(Appendix to Sec. 4162S)
Category
Form No.
MOR Ref.
Frequency
Submission Deadline
Submission Procedure
A-2
BSP 7-26-02H
4162S
(As
amended
by M-029
dated
09.24.07
and
Cir.
No.
837
dated
06.18.14)
Consolidated Statement of Condition1
Quarterly
on or before the end of
the
immediately
following
month
Original to SDC
A-2
Unnumbered
4691S
(Rev. May
2002,
as
amended
by
Cir.
No.
612
dated
06.03.08)
Report on Suspicious Transactions
As
transaction
occurs
10th
business
day
from
date of occurrence transaction/
knowledge
Original and duplicate Anti-Money Laundering
Council (AMLC)
A-2
Unnumbered
4691S
Report on Covered Transactions
-do-
-do-
A-3
BSP 7-26-03H
4162S
Consolidated Statement of Income and
Expenses1
Quarterly
on or before the end of
the
immediately
following
month
(As
amended
by
M-029
dated
09.24.07
and Cir. No.
837 dated
06.18.14)
1
Report Title
Revised reporting templates effective report ending 30 June 2014.
Page 1 of 4
-doOriginal to SDC
APP. S-2
14.12.31
Category
Form No.
MOR Ref.
A-3
BSP 7-26-18.1H
A-3
Unnumbered
B
B
2
SES II Form 15
(NP08-TB)
Report Title
Frequency
4358S
Copy of entry in NSSLA records of
written approval of majority of directors
on credit accommodation to directors
and
officers
with
accompanying
Certification on Loans Granted to
Directors/Officers
As
approved
20th
business
date of approval
day
from
Original - ISD I
4162S
(CL-050
dated
10.04.07
and
CL-059
dated
11.28.07)
Report on Borrowings of BSP Personnel
Quarterly
15th
banking
day
end of reference quarter
after
Original to SDC
4172S
Audited/Unaudited Financial Statements
required in Sec. 4181S accompanied by
annual report2 (to members, if any)
Annually
120th/60th
day
after
end
of
fiscal
year
as
required in Sec. 4181S
Original - ISD I
4147S
(As
amended
by Cir. No.
758 dated
05.11.12
and M-024
dated
Biographical Data of Trustees/Officers
with rank of SVP and above with ID
picture
Upon every
election/
re-election or
appointment/
promotion or if
change in name
occurs
10th business day from date of
election/re-election
of
the
trustees/meeting of the board of
trustees in which the officers
are appointed/promoted
Hard copy to appropriate
department of the SES
- Updated Bio-data in case of change of
name due to change in civil status
Required of NSSLAs with total resources of P 10 million or more
Page 2 of 4
Submission Deadline
Submission Procedure
10th business day from the date
the change of name occurred
APP. S-2
14.12.31
Category
Form No.
B
MOR Ref.
Report Title
Frequency
Submission Deadline
Submission Procedure
07.31.08)
- Notarized list of the incumbent
members of the board of trustees and
officers
4143S
(Circular
No.
758
dated
05.11.12)
Duly accomplished and notarized
authorization form for querying the
Bangko Sentral watchlist files
Upon election/
re-election or
appointment/
promotion as first
time trustee/
officer within an
NSSLA
10th business day from date of
election/re-election
of
the
trustees/meeting of the board of
trustees in which the officers
are appointed/promoted
Hard copy to appropriate
department of the SES
Hard copy to appropriate
department of the SES
10th business day from the
election of the BOT
B
Unnumbered
4143S
(Circular
No.
758
dated
05.11.12)
List of Members of the Board of Trustees
and Officers
Annually
10th business day from the
election of the board of trustees
B
BSP 7-26-20H
4162S
Report on Crimes/Losses
As crime/
incident
occurs
See Annex S-2-a for guidelines
on reporting crimes and losses
-do-
B
4306S.3
Notice/Application
Loans
30th
day
prior
to
intended date of write-off
-do-
B
4162S
Board
Resolution
on
NSSLA's
signatories to reports submitted to
Bangko Sentral
B
Page 3 of 4
for
General Information Sheet
Write-Off
of
As write-off
occurs
As authorized
Annually
the
3rd day from date of resolution
Hard copy to appropriate
department of the SES
30th day
annual
meeting
Drop Box - SEC Central
Receiving Section
Original - SEC
Duplicate - BSP
from date of
stockholders'
APP. S-2
14.12.31
Category
B
Form No.
Form I
Schedule 1
MOR Ref.
M-031
dated
09.11.09
and
Cir.
No.
649
dated
03.09.09
Report Title
Report
on
Transactions
Electronic
Frequency
Money
Submission Deadline
Quarterly
15
banking
days
end of reference quarter
Quarterly
Not later than one (1)
month after the end of
every quarter
Quarterly
Statement
of
E-Money
Transactions - Volume and Amount of EMoney
Transactions
Quarterly
Statement
of
Liquidity
Cover
Submission Procedure
after
e-mail sdcothers-emoney@
bsp.gov.ph
Hardcopy- SDC
Schedules
1 - E-Money Balances
B
Page 4 of 4
4402S.4
(Cir. No.
857 dated
11.21.14)
Complaints Report
SDC
APP. S-2
08.12.31
Annex S-2-a
REPORTING GUIDELINES ON CRIMES/LOSSES
1. NSSLAs shall report on the
following matters through the
appropriate supervising and examining
department:
a. Crimes whether consummated,
frustrated or attempted against property/
facilities (such as robbery, theft,
swindling or estafa, forgery and other
deceits) and other crimes involving loss/
destruction of property of the NSSLA
when the amount involved in each crime
is P20,000 or more.
Crimes involving NSSLA personnel,
regardless of whether or not such crimes
involve the loss/destruction of property
of the NSSLA, even if the amount
involved is less than those above
specified, shall likewise be reported to
the BSP.
b. Incidents involving material loss,
destruction or damage to the institution’s
property/facilities, other than arising from
S Regulations
Appendix S-2 - Page 4
a crime, when the amount involved per
incident is P20,000 or more.
2. The following guidelines shall be
observed in the preparation and
submission of the report.
a. The report shall be prepared in
two (2) copies and shall be submitted
within five (5) business days from
knowledge of the crime or incident, the
original to the appropriate supervising
department and the duplicate to the BSP
Security Coordinator, thru the Director,
Security Investigation and Transport
Department.
b. Where a thorough investigation
and evaluation of facts is necessary to
complete the report, an initial report
submitted within the five (5)-business day
deadline may be accepted: Provided,
That a complete report is submitted not
later than fifteen (15) business days from
termination of investigation.
Manual of Regulations for Non-Bank Financial Institutions
APP. S-3
08.12.31
GUIDELINES ON PRESCRIBED REPORTS SIGNATORIES
AND SIGNATORY AUTHORIZATION
(Appendix to Subsec. 4162S.1)
Category A-1 reports shall be signed
by the chief executive officer, or in his
absence, by the executive vice-president,
and by the comptroller, or in his absence,
by the chief accountant, or by officers
holding equivalent positions. The
designated signatories in this category,
including their specimen signatures, shall
be contained in a resolution approved by
the board of directors in the format
prescribed in Annex S-3-a.
managers/officers in-charge. Likewise, the
signing authority in this category shall be
contained in a resolution approved by the
board of directors in the format prescribed
in Annex S-3-b.
Category A-2 reports of head offices
shall be signed by the president, executive
vice-presidents, vice-presidents or officers
holding equivalent positions. Such reports
of other offices/units (such as branches)
shall be signed by their respective
Copies of the board resolutions on the
report signatory designations shall be
submitted to the appropriate supervising
and examining department of the BSP
within three (3) business days from the date
of resolution.
Categories A-3 and B reports shall be
signed by officers or their alternates, who
shall be duly designated by the board of
directors. A copy of the board resolution,
with format as prescribed in Annex S-3-c.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-3 - Page 1
APP. S-3
08.12.31
Annex S-3-a
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS
Resolution No. _____
Whereas, it is required under Subsec. 4162S.1 that Category A-1 reports be signed by the
Chief Executive Officer, or in his absence, by the Executive Vice-President, and by the
Comptroller, or in his absence, by the Chief Accountant, or by officers holding equivalent positions.
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution's Board of Directors;
(Name of Institution)
,
Whereas, we, the members of the Board of Directors of
are conscious that, in designating the officials who would sign said Category A-1 reports,
we are actually empowering and authorizing said officers to represent and act for or in behalf
of the Board of Directors in particular and
(Name of Institution)
in general;
Whereas, this Board has full faith and confidence in the institution's Chief Executive
Officer, Executive Vice-President, Comptroller and Chief Accountant, as the case may be,
and, therefore, assumes responsibility for all the acts which may be performed by aforesaid
officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
1. Mr.____________
President
2. Mr.____________
or
Executive
Vice-President
3. Mr.____________
and
Comptroller
4. Mr.____________
or
Chief
Accountant
_________________
Specimen Signature
_________________
Specimen Signature
_________________
Specimen Signature
_________________
Specimen Signature
are hereby authorized to sign Category A-1 reports of
(Name of Institution)
Done in the City of ________________ Philippines, this ____day of
.
, 20____.
CHAIRMAN OF THE BOARD
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
ATTESTED BY:
______________________
CORPORATE SECRETARY
S Regulations
Appendix S-3 - Page 2
Manual of Regulations for Non-Bank Financial Institutions
APP. S-3
08.12.31
Annex S-3-b
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-2 REPORTS
Resolution No. _____
Whereas, it is required under Subsec. 4162S.1 that Category A-2 reports of head offices
be signed by the President, Executive Vice-Presidents, Vice-Presidents or officers holding
equivalent positions, and that such reports of other offices be signed by the respective
managers/officers-in-charge;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution's Board of Directors;
Whereas, we, the members of the Board of Directors of (Name of Institution) , are
conscious that, in designating the officials who would sign said Category A-2 reports, we are
actually empowering and authorizing said officers to represent and act for or in behalf of the
Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution's President (and/or
the Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibility
for all the acts which may be performed by aforesaid officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
Name of Officer
Specimen Signature
Position Title
Report No.
_____________
________________
__________
_________
are hereby authorized to sign the Category A-2 reports of
(Name of Institution)
.
Done in the City of ________________ Philippines, this ____day of ____, 20____.
_________________________
CHAIRMAN OF THE BOARD
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-3 - Page 3
APP. S-3
08.12.31
Annex S-3-c
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORIES
A-3 AND B REPORTS
Resolution No. _____
Whereas, it is required under Subsec. 4162S.1 that Categories A-3 and B reports be
signed by officers or their alternates;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution's Board of Directors;
Whereas, we the members of the Board of Directors of (Name of Institution) , are
conscious that, in designating the officials who would sign said Categories A-3 and B reports,
we are actually empowering and authorizing said officers to represent and act for or in
(Name of Institution)
in general;
behalf of the Board of Directors in particular and
Whereas, this Board has full faith and confidence in the institution's authorized signatories
and, therefore, assumes responsibility for all the acts which may be performed by aforesaid
officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
Name of Authorized Signatory/Alternate
Specimen Signature
Position Title
Report
1. Authorized
(Alternate)
2. Authorized
(Alternate)
etc.
are hereby authorized to sign the Category A-2 reports of
(Name of Institution)
.
Done in the City of ________________ Philippines, this ____day of ____, 20____.
_________________________
CHAIRMAN OF THE BOARD
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY
S Regulations
Appendix S-3 - Page 4
Manual of Regulations for Non-Bank Financial Institutions
APP. S-4
12.12.31
FORMAT OF DISCLOSURE STATEMENT ON
SMALL BUSINESS/RETAIL/CONSUMER CREDIT
[Appendix to Subsec. 4307S.2]
_________________________________
(Business Name of Creditor)
DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION
(As required under R.A. No. 3765, Truth in Lending Act)
NAME OF BORROWER
ADDRESS
1. LOAN AMOUNT
2. OTHER BANK CHARGES/DEDUCTIONS COLLECTED1
a. Documentary/Science Stamps
b. Mandatory Credit Insurance
c. Others (Specify)
(date)
XXX
P
XXX
P
XXX
P
3. NET PROCEEDS OF LOAN (Item 1 less Item 2)
4. SCHEDULE OF PAYMENTS
a. Single payment due on
b. Installment Payments
P
P
XXX
(Please see attached amortization schedule)
5. EFFECTIVE INTEREST RATE (Interest and Other Charges)
XXX%
Explanation: The effective interest rate is higher than the contractual interest
rate of ___% because of some deductions in Item 2 above.
6. CONDITIONAL CHARGES THAT MAY BE IMPOSED (if applicable). Please specify manner of
imposition:
a. Late Charge
P
b. Prepayment (penalty/refund)
c. Others (Specify)
CERTIFIED CORRECT:
_______________________________
(Signature of Creditor/Authorized
Representative Over Printed Name)
_______________________________
Position
I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE CONSUMMATION
OF THE CREDIT TRANSACTION.
_______________________________
(Signature of Borrower over
Printed Name)
_________________________
Date
Notes:
¹ Itemize all charges including advance deductions
- Small business/Retail/Consumer Loans includes microfinance, auto (motor), salary, personal, medical,
educational and other loans of similar nature
- This document contains the minimum information required to be disclosed to the borrower and may be
enhanced to improve client information
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-4 - Page 1
APP. S-4
12.12.31
AMORTIZATION SCHEDULE
(Sample Only)
Installment
(A)
Loan
(B)
xxx
1
2
3
4
5
6
7
8
9
10
11
12
Total
Principal
(C)
Interest
(D)
Total
(E)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
O/S Balance
(F)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Legends:
A
B
C
D
E
F
-
Number of installment periods based on loan term
Gross amount of loan
Installment payment on the principal
Installment payment on the interest
Total amortization payment for the installment period
Outstanding principal balance of the loan
(As amended byCircular No. 754 dated 17 April 2012 and M-2012-018 dated 19 April 2012)
S Regulations
Appendix S-4 - Page 2
Manual of Regulations for Non-Bank Financial Institutions
APP. S-5
08.12.31
ABSTRACT OF “TRUTH IN LENDING ACT” (Republic Act No. 3765)
(Appendix to Subsec. 4307S.4)
Section 1. This Act shall be known as the
“Truth in Lending Act.”
Sec. 2. Declaration of Policy. It is hereby
declared to be the policy of the State to protect
its citizens from a lack of awareness of the
true cost of credit to the user by assuring a
full disclosure of such cost with a view of
preventing the uninformed use of credit to
the detriment of the national economy.
xxx
xxx
xxx
Sec. 3. As used in this Act, the term xxx
xxx
xxx
(3) “Finance charge” includes interest, fees,
service charges, discounts, and such other
charges incident to the extension of credit
as the Board may by regulation prescribe.
xxx
xxx
xxx
Sec. 4. Any creditor shall furnish to each
person to whom credit is extended, prior
to the consummation of the transaction a
clear statement in writing setting forth, to
the extent applicable and in accordance
with rules and regulations prescribed by
the Board, the following information:
(1) the cash price or delivered price
of the property or service to be acquired;
(2) the amounts, if any, to be credited
as down payment and/or trade-in;
(3) the difference between the
amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized,
which are paid or to be paid by such person
in connection with the transaction but which
are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in
terms of pesos and centavos; and
(7) the percentage that the finance
charge bears to the total amount to be
financed expressed as a simple annual rate
on the outstanding unpaid balance of the
obligation.
xxx
xxx
xxx
Sec. 6. (a) Any creditor who in connection
with any credit transaction fails to disclose to
any person any information in violation of
this Act or any regulation issued thereunder
shall be liable to such person in the amount
of P100 or in an amount equal to twice the
finance charge required by such creditor in
connection with such transaction, whichever
is the greater, except that such liability shall
not exceed P2,000 on any credit transaction.
xxx
xxx
xxx
(c) Any person who willfully violates
any provision of this Act or any regulation
issued thereunder shall be fined by not less
than P1,000 nor more than P5,000 or
imprisonment for not less than 6 months
nor more than one year or both.
xxx
xxx
xxx
(d) Any final judgment hereafter
rendered in any criminal proceeding under
this Act to the effect that a defendant has
willfully violated this Act shall be prima
facie evidence against such defendant in
an action or proceeding brought by any
other party against such defendant under
this Act as to all matters respecting which
said judgment would be an estoppel as
between the parties thereto.
Sec. 7. This Act shall become effective
upon approval.
Approved, 22 June 1963.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-5 - Page 1
APP. S-6
11.12.31
ANTI-MONEY LAUNDERING REGULATIONS
(Appendix to Section 4691S)
(Deleted pursuant to Circular No. 706 dated 05 January 2011)
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-6 - Page 1
APP. S-6
11.12.31
Annex S-6-a
CERTIFICATION OF COMPLIANCE
WITH ANTI-MONEY LAUNDERING REGULATIONS
(Deleted pursuant Circular No. 706 dated 05 January 2011)
S Regulations
Appendix S-6 - Page 2
Manual of Regulations for Non-Bank Financial Institutions
APP. S-6
11.12.31
Annex S-6-b
AMLC Resolution No. 292
RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS AND
SUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS1
(Annex to Appendix S-6)
(Deleted pursuant to Circular No. 706 dated 05 January 2011)
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-6 - Page 3
APP. S-7
11.12.31
REVISED IMPLEMENTING RULES AND REGULATIONS
R.A. NO. 9160, AS AMENDED BY R.A. NO. 9194
(Appendix to Sec. 4691S)
(Deleted pursuant to Circular No. 706 dated 05 January 2011)
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-7 - Page 1
APP. S-8
09.12.31
GUIDELINES TO GOVERN THE SELECTION, APPOINTMENT, REPORTING
REQUIREMENTS AND DELISTING OF EXTERNAL AUDITORS AND/OR
AUDITING FIRM OF COVERED ENTITIES
(Appendix to Secs. 4180S and 4190S)
Pursuant to Section 58 of the Republic
Act No. 8791, otherwise known as "The
General Banking Law of 2000", and the
existing provisions of the executed
Memorandum of Agreement (hereinafter
referred to as the MOA) dated 12 August
2009, binding the Bangko Sentral ng
Pilipinas (BSP), Securities and Exchange
Commission (SEC), Professional
Regulation Commission (IC) - Board of
Accountancy (BOA) and the Insurance
Commission (IC) for a simplified and
synchronized accreditation requirements
for external auditor and/or auditing firm,
the Monetary Board, in its Resolution No.
950 dated 02 July 2009, approved the
following revised rules and regulations
that shall govern the selection and
delisting by the BSP of covered institution
which under special laws are subject to
BSP supervision.
A. STATEMENT OF POLICY
It is the policy of the BSP to ensure
effective audit and supervision of banks,
QBs, trust entities and/or NSSLAs
including their subsidiaries and affiliates
engaged in allied activities and other FIs
which under special laws are subject to
BSP supervision, and to ensure reliance
by BSP and the public on the opinion of
external auditors and auditing firms by
prescribing the rules and regulations that
shall govern the selection, appointment,
reporting requirements and delisting for
external auditors and auditing firms of said
institutions, subject to the binding
provisions and implementing regulations
of the aforesaid MOA.
B. COVERED ENTITIES
The proposed amendment shall apply
to the following supervised institution, as
categorized below, and their external
auditors:
1. Category A
a. UBs/KBs;
b. Foreign banks and branches or
subsidiaries of foreign banks, regardless of
unimpaired capital; and
c. Banks, trust department of qualified
banks and other trust entities with additional
derivatives authority, pursuant to Sec. X611
regardless of classification, category and
capital position.
2. Category B
a. TBs;
b. QBs;
c. Trust department of qualified banks
and other trust entities;
d. National Coop Banks; and
e. NBFIs with quasi-banking functions.
3. Category C
a. RBs;
b. NSSLAs;
c. Local Coop Banks; and
d. Pawnshops.
The above categories include their
subsidiaries and affiliates engaged in allied
activities and other FIs which are subject to
BSP risk-based and consolidated supervision:
Provided, That an external auditor who has
been selected by the BSP to audit covered
entities under Category A is automatically
qualified to audit entities under Category B
and C and if selected by the BSP to audit
covered entities under Category B is
automatically qualified to audit entities under
Category C.
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-8 - Page 1
APP. S-8
09.12.31
C. DEFINITION OF TERMS
The following terms shall be defined as
follows:
1. Audit – an examination of the
financial statements of any issuer by an
external auditor in compliance with the rules
of the BSP or the SEC in accordance with
then applicable generally accepted auditing
and accounting principles and standards, for
the purpose of expressing an opinion on
such statements.
2. Non-audit services – any
professional services provided to the
covered institution by an external auditor,
other than those provided to a covered
institution in connection with an audit or a
review of the financial statements of said
covered institution.
3. Professional Standards - includes:
(a) accounting principles that are
(1) established by the standard setting body;
and (2) relevant to audit reports for particular
issuers, or dealt with in the quality control
system of a particular registered public
accounting firm; and (b) auditing standards,
standards for attestation engagements,
quality control policies and procedures,
ethical and competency standards, and
independence standards that the BSP or SEC
determines (1) relate to the preparation or
issuance of audit reports for issuers; and
(2) are established or adopted by the BSP or
promulgated as SEC rules.
4. Fraud – an intentional act by one (1)
or more individuals among management,
employees, or third parties that results in a
misrepresentation of financial statements,
which will reduce the consolidated total
assets of the company by five percent (5%).
It may involve:
a. Manipulation, falsification or
alteration of records or documents;
b. Misappropriation of assets;
c. Suppression or omission of the
effects of transactions from records or
documents;
S Regulations
Appendix S-8 - Page 2
d. Recording of transactions without
substance;
e. Intentional misapplication of
accounting policies; or
f. Omission of material information.
5. Error - an intentional mistake in
financial statements, which will reduce the
consolidated total assets of the company by
five percent (5%). It may involve:
a. Mathematical or clerical mistakes
in the underlying records and accounting
data;
b. Oversight or misinterpretation of
facts; or
c. Unintentional misapplication of
accounting policies.
6. Gross negligence - wanton or
reckless disregard of the duty of due care in
complying with generally accepted auditing
standards.
7. Material fact/information - any fact/
information that could result in a change in
the market price or value of any of the
issuer’s securities, or would potentially affect
the investment decision of an investor.
8. Subsidiary - a corporation or firm
more than fifty percent (50%) of the
outstanding voting stock of which is directly
or indirectly owned, controlled or held with
power to vote by a bank, QB, trust entity or
NSSLA.
9. Affiliate - a corporation, not more
than fifty percent (50%) but not less than
ten percent (10%) of the outstanding
voting stock of which is directly or
indirectly owned, controlled or held with
power to vote by a bank, QB, trust entity
or NSSLA and a juridical person that is
under common control with the bank,
QB, trust entity or NSSLA.
10. Control - exists when the parent
owns directly or indirectly more than one
half of the voting power of an enterprise
unless, in exceptional circumstance, it can
be clearly demonstrated that such
ownership does not constitute control.
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Control may also exist even when
ownership is one half or less of the voting
power of an enterprise when there is:
a. Power over more than one half of
the voting rights by virtue of an agreement
with other stockholders;
b. Power to govern the financial and
operating policies of the enterprise under a
statute or an agreement;
c. Power to appoint or remove the
majority of the members of the board of
directors or equivalent governing body; or
d. Power to cast the majority votes at
meetings of the board of directors or
equivalent governing body.
11. External auditor - means a single
practitioner or a signing partner in an
auditing firm.
12. Auditing firm – includes a
proprietorship, partnership limited liability
company, limited liability partnership,
corporation (if any), or other legal entity,
including any associated person of any of
these entities, that is engaged in the practice
of public accounting or preparing or issuing
audit reports.
13. Associate – any director, officer,
manager or any person occupying a similar
status or performing similar functions in the
audit firm including employees performing
supervisory role in the auditing process.
14. Partner - all partners including those
not performing audit engagements.
15. Lead partner – also referred to as
engagement partner/partner-in-charge/
managing partner who is responsible for
signing the audit report on the consolidated
financial statements of the audit client, and
where relevant, the individual audit report
of any entity whose financial statements
form part of the consolidated financial
statements.
16. Concurring partner - the partner
who is responsible for reviewing the audit
report.
17. Auditor-in-charge – refers to the
team leader of the audit engagement.
D. GENERAL CONSIDERATION AND
LIMITATIONS OF THE SELECTION
PROCEDURES
1. Subject to mutual recognition
provision of the MOA and as implemented
in this regulation, only external auditors and
auditing firms included in the list of BSP
selected external auditors and auditing firms
shall be engaged by all the covered
institutions detailed in Item "B". The external
auditor and/or auditing firm to be hired shall
also be in-charge of the audit of the entity’s
subsidiaries and affiliates engaged in allied
activities: Provided, That the external auditor
and/or auditing firm shall be changed or the
lead and concurring partner shall be rotated
every five (5) years or earlier: Provided
further, That the rotation of the lead and
concurring partner shall have an interval of
at least two (2) years.
2. Category A covered entities which
have engaged their respective external
auditors and/or auditing firm for a
consecutive period of five (5) years or more
as of 18 September 2009 shall have a one
(1)-year period from said date within which
to either change their external auditors
and/or auditing firm or to rotate the lead
and/or concurring partner.
3. The selection of the external auditors
and/or auditing firm does not exonerate the
covered institution or said auditors from
their responsibilities. Financial statements
filed with the BSP are still primarily the
responsibility of the management of the
reporting institution and accordingly, the
fairness of the representations made
therein is an implicit and integral part of
the institution’s responsibility. The
independent certified public accountant’s
responsibility for the financial statements
required to be filed with the BSP is
confined to the expression of his opinion,
or lack thereof, on such statements which
he has audited/examined.
4. The BSP shall not be liable for any
damage or loss that may arise from its
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APP. S-8
09.12.31
selection of the external auditors and/or
auditing firm to be engaged by banks for
regular audit or non-audit services.
5. Pursuant to paragraph (5) of the
MOA, SEC, BSP and IC shall mutually
recognize the accreditation granted by any
of them for external auditors and firms of
Group C or D companies under SEC,
Category B and C under BSP, and insurance
brokers under IC. Once accredited/selected
by any one (1) of them, the above-mentioned
special requirements shall no longer be
prescribed by the other regulators.
For corporations which are required to
submit financial statements to different
regulators and are not covered by the mutual
recognition policy of this MOA, the
following guidance shall be observed:
a. The external auditors of UBs which
are listed in the Exchange, should be
selected/accredited by both the BSP and
SEC, respectively; and
b. For insurance companies and banks
that are not listed in the Exchange, their
external auditors must each be selected/
accredited by BSP or IC, respectively. For
purposes of submission to the SEC, the
financial statements shall be at least audited
by an external auditor registered/accredited
with BOA.
This mutual recognition policy shall
however be subject to the BSP restriction
that for banks and its subsidiary and affiliate
bank, QBs, trust entities, NSSLAs, their
subsidiaries and affiliates engaged in allied
activities and other FIs which under special
laws are subject to BSP consolidated
supervision, the individual and consolidated
financial statements thereof shall be audited
by only one (1) external auditor/auditing
firm.
6. The selection of external auditors
and/or auditing firm shall be valid for a
period of three (3) years. The SES shall make
an annual assessment of the performance
of external auditors and/or auditing firm and
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Appendix S-8 - Page 4
will recommend deletion from the list even
prior to the three (3)-year renewal period, if
based on assessment, the external auditors’
report did not comply with BSP
requirements.
E. QUALIFICATION REQUIREMENT
The following qualification requirements
are required to be met by the individual
external auditor and the auditing firm at the
time of application and on continuing basis,
subject to BSP’s provisions on the delisting
and suspension of accreditation:
1. Individual external auditor
a. General requirements
(1) The individual applicant must be
primarily accredited by the BOA. The
individual external auditor or partner
in-charge of the auditing firm must have at
least five (5) years of audit experience.
(2) Auditor’s independence.
In addition to the basic screening
procedures of BOA on evaluating auditor’s
independence, the following are required
for BSP purposes to be submitted in the form
of notarized certification that:
(a) No external auditor may be engaged
by any of the covered institutions under Item
"B" hereof if he or any member of his
immediate family had or has committed to
acquire any direct or indirect financial
interest in the concerned covered institution,
or if his independence is considered
impaired under the circumstances specified
in the Code of Professional Ethics for CPAs.
In case of a partnership, this limitation shall
apply to the partners, associates and the
auditor-in-charge of the engagement and
members of their immediate family;
(b) The external auditor does not have/
shall not have outstanding loans or any
credit accommodations or arranged for the
extension of credit or to renew an extension
of credit (except credit card obligations
which are normally available to other credit
card holders and fully secured auto loans
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APP. S-8
09.12.31
and housing loans which are not past due)
with the covered institutions under Item "B"
at the time of signing the engagement and
during the engagement. In the case of
partnership, this prohibition shall apply to
the partners and the auditor-in-charge of the
engagement; and
(c) It shall be unlawful for an external
auditor to provide any audit service to a
covered institution if the covered
institution’s CEO, CFO, Chief Accounting
Officer (CAO), or comptroller was
previously employed by the external auditor
and participated in any capacity in the audit
of the covered institution during the oneyear preceding the date of the initiation of
the audit;
(3) Individual applications as external
auditor of entities under Category A above
must have established adequate quality
assurance procedures, such consultation
policies and stringent quality control, to
ensure full compliance with the accounting
and regulatory requirements.
b. Specific requirements
(1) At the time of application,
regardless of the covered institution, the
external auditor shall have at least five (5)
years experience in external audits;
(2) The audit experience above refers
to experience required as an associate,
partner, lead partner, concurring partner or
auditor-in-charge; and
(3) At the time of application, the
applicant must have the following track
record:
(a) For Category A, he/she must have
at least five (5) corporate clients with total
assets of at least P50.0 million each.
(b) For Category B, he/she must have
had at least three (3) corporate clients with
total assets of at least P25.0 million each.
(c) For Category C, he/she must have
had at least three (3) corporate clients with
total assets of at least P5.0 million each;
2. Auditing firms
a. The auditing firm must be primarily
accredited by the BOA and the name of the
firm’s applicant partner’s should appear in
the attachment to the certificate of
accreditation issued by BOA. Additional
partners of the firm shall be furnished by
BOA to the concerned regulatory agencies
(e.g. BSP, SEC and IC) as addendum to the
firm’s accreditation by BOA.
b. Applicant firms to act as the external
auditor of entities under Category A in Item
"B" must have established adequate quality
assurance procedures, such consultation
policies and stringent quality control, to
ensure full compliance with the accounting
and regulatory requirements.
c. At the time of application, the
applicant firm must have at least one (1)
signing practitioner or partner who is already
selected/accredited, or who is already
qualified and is applying for selection by
BSP.
d. A registered accounting/auditing
firm may engage in any non-auditing
service for an audit client only if such
service is approved in advance by the
client’s audit committee. Exemptions from
the prohibitions may be granted by the
Monetary Board on a case-by-case basis
to the extent that such exemption is
necessary or appropriate in the public
interest. Such exemptions are subject to
review by the BSP.
e. At the time of application, the
applicant firm must have the following
track record:
(1) For Category A, the applicant firm
must have had at least twenty (20)
corporate clients with total assets of at least
P50.0 million each;
(2) For Category B, the applicant firm
must have had at least five (5) corporate
clients with total assets of at least P20.0
million each;
(3) For Category C, the applicant firm
must have had at least five (5) corporate
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APP. S-8
09.12.31
clients with total assets of at least P5.0
million each.
F. APPLICATION FOR AND/OR
RENEWAL OF THE SELECTION OF
INDIVIDUAL EXTERNAL AUDITOR
1. The initial application for BSP
selection shall be signed by the external
auditor and shall be submitted to the
appropriate department of the SES together
with the following documents/information:
a. Copy of effective and valid BOA
Certificate of Accreditation with the
attached list of qualified partner/s of the firm;
b. A notarized undertaking of the
external auditor that he is in compliance
with the qualification requirements under
Item "E" and that the external auditor shall
keep an audit or review working papers for
at least seven (7) years in sufficient detail to
support the conclusion in the audit report
and making them available to the BSP’s
authorized representative/s when required
to do so;
c. Copy of Audit Work Program which
shall include assessment of the audited
institution’s compliance with BSP rules and
regulations, such as, but not limited to the
following:
(1) capital adequacy ratio, as currently
prescribed by the BSP;
(2) AMLA framework;
(3) risk
management
system,
particularly liquidity and market risks; and
(4) loans and other risk assets review
and classification, as currently prescribed
by the BSP rules and regulations.
d. If the applicant will have clients
falling under Category A, copy of the Quality
Assurance Manual which, aside from the
basic elements as required under the BOA
basic quality assurance policies and
procedures, specialized quality assurance
procedures should be provided consisting
of, among other, review asset quality,
adequacy of risk-based capital, risk
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Appendix S-8 - Page 6
management systems and corporate
governance framework of the covered
entities.
e. Copy of the latest AFS of the
applicant’s two (2) largest clients in terms
of total assets.
2. Subject to BSP’s provision on early
deletion from the list of selected external
auditor, the selection may be renewed
within two (2) months before the expiration
of the three (3)-year effectivity of the
selection upon submission of the written
application for renewal to the appropriate
department of the SES together with the
following documents/information:
(a) copy of updated BOA Certificate of
Accreditation with the attached list of
qualified partner/s of the firm;
(b) notarized certification of the external
auditor that he still possess all qualification
required under Item "F.1.b" of this Appendix;
(c) list of corporate clients audited
during the three (3)-year period of being
selected as external auditor by BSP. Such
list shall likewise indicate the findings noted
by the BSP and other regulatory agencies
on said AFS including the action thereon
by the external auditor; and
(d) written proof that the auditor has
attended or participated in trainings for at
least thirty (30) hours in addition to the
BOA’s prescribed training hours. Such
training shall be in subjects like international
financial reporting standards, international
standards of auditing, corporate
governance, taxation, code of ethics,
regulatory requirements of SEC, IC and BSP
or other government agencies, and other
topics relevant to his practice, conducted
by any professional organization or
association duly recognized/accredited by
the BSP, SEC or by the BOA/PRC through a
CPE Council which they may set up.
The application for initial or renewal
accreditation of an external auditor shall be
accomplished by a fee of P2,000.00.
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APP. S-8
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G. APPLICATION FOR AND/OR
RENEWAL OF THE SELECTION OF
AUDITING FIRMS
1. The initial application shall be
signed by the managing partner of the
auditing firm and shall be submitted to
the appropriate department of the SES
together with the following documents/
information:
a. copy of effective and valid BOA
Certificate of Accreditation with attachment
listing the names of qualified partners;
b. notarized certification that the firm
is in compliance with the general
qualification requirements under Item "E.2"
and that the firm shall keep an audit or
review working papers for at least seven
(7) years insufficient detail to support the
conclusions in the audit report and making
them available to the BSP’s authorized
representative/s when required to do so;
c. copy of audit work program which
shall include assessment of the audited
institution’s compliance with BSP rules and
regulations, such as, but not limited to the
following;
(1) capital adequacy ratio, as currently
prescribed by the BSP;
(2) AMLA framework;
(3) risk
management
system,
particularly liquidity and market risks; and
(4) loans and other risk assets review
and classification, as currently prescribed
by the BSP rules and regulations.
d. If the applicant firm will have
clients falling under Category A, copy
Quality Assurance Manual where, aside
from the basic elements as required under
the BOA basic quality assurance policies
and procedures, specialized quality
assurance procedures should be provided
relative to, among others review asset
quality, adequacy of risk-based capital, risk
management systems and corporate
governance framework of covered entities;
e. Copy of the latest AFS of the
applicant’s two (2) largest clients in terms
of total assets; and
f. Copy of firm’s AFS for the
immediately preceding two (2) years.
2. Subject to BSP’s provision on early
deletion from the list of selected auditing
firm, the selection may be renewed within
two (2) months before the expiration of the
three (3)-year effectivity of the selection upon
submission of the written application for
renewal to the appropriate department of the
SES together with the following documents/
information:
a. a copy of updated BOA Certificate
of Registration with the attached list of
qualified partner/s of the firm;
b. amendments on Quality Assurance
Manual, inclusive of written explanation on
such revision, if any; and
c. notarized certification that the firm
is in compliance with the general
qualification requirements under Item
"G.1.b" hereof;
The application for initial or renewal
accreditation of an auditing firm shall be
accompanied by a fee of P5,000.00.
H. REPORTORIAL REQUIREMENTS
1. To enable the BSP to take timely and
appropriate remedial action, the external
auditor and/or auditing firm must report to
the BSP within thirty (30) calendar days after
discovery, the following cases:
a. Any material finding involving fraud
or dishonesty (including cases that were
resolved during the period of audit);
b. Any potential losses the aggregate of
which amounts to at least one percent (1%)
of the capital;
c. Any finding to the effect that the
consolidated assets of the company, on a
going concern basis, are no longer
adequate to cover the total claims of
creditors; and
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APP. S-8
09.12.31
d. Material
internal
control
weaknesses which may lead to financial
reporting problems.
2. The external auditor/auditing firm
shall report directly to the BSP within fifteen
(15) calendar days from the occurrence of
the following:
a. Termination or resignation as
external auditor and stating the reason
therefor;
b. Discovery of a material breach of
laws or BSP rules and regulations such as,
but not limited to:
(1) CAR; and
(2) Loans and other risk assets review
and classification.
c. Findings on matters of corporate
governance that may require urgent action
by the BSP.
3. In case there are no matters to report
(e.g. fraud, dishonesty, breach of laws, etc.)
the external auditor/auditing firm shall
submit directly to BSP within fifteen (15)
calendar days after the closing of the audit
engagement a notarized certification that
there is none to report.
The management of the covered
institutions, including its subsidiaries and
affiliates, shall be informed of the adverse
findings and the report of the external
auditor/auditing firm to the BSP shall include
pertinent explanation and/or corrective
action.
The management of the covered
institutions, including its subsidiaries and
affiliates, shall be given the opportunity to
be present in the discussions between the
BSP and the external auditor/auditing firm
regarding the audit findings, except in
circumstances where the external auditor
believes that the entity’s management is
involved in fraudulent conduct.
It is, however, understood that the
accountability of an external auditor/
auditing firm is based on matters within the
normal coverage of an audit conducted in
S Regulations
Appendix S-8 - Page 8
accordance with generally accepted
auditing standards and identified non-audit
services.
I. DELISTING AND SUSPENSION OF
SELECTED EXTERNAL AUDITOR/
AUDITING FIRM
1. An external auditor’s duly selected
pursuant to this regulation shall be
suspended or delisted, in a manner
provided under this regulation, under any
of the following grounds:
a. Failure to submit the report under
Item "H" of this Appendix or the required
reports under Subsec. X190.1;
b. Continuous conduct of audit despite
loss of independence as provided under
Item "E.1" or contrary to the requirements
under the Code of Professional Ethics;
c. Any willful misrepresentation in the
following information/documents;
(1) application and renewal for
accreditation;
(2) report required under Item "H"; and
(3) Notarized certification of the
external auditor and/or auditing firm.
d. The BOA found that, after due
notice and hearing, the external auditor
committed an act discreditable to the
profession as specified in the Code of
Professional Ethics for CPAs. In this case,
the BOA shall inform the BSP of the results
thereof;
e. Declaration of conviction by a
competent court of a crime involving moral
turpitude, fraud (as defined in the Revised
Penal Code), or declaration of liability for
violation of the banking laws, rules and
regulation, the Corporation Code of the
Philippines, the Securities Regulation Code
(SRC); and the rules and regulations of
concerned regulatory authorities;
f. Refusal for no valid reason, upon
lawful order of the BSP, to submit the
requested documents in connection with an
ongoing investigation. The external auditor
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APP. S-8
09.12.31
should however been made aware of such
investigation;
g. Gross negligence in the conduct of
audits which would result, among others,
in non-compliance with generally accepted
auditing standards in the Philippines or
issuance of an unqualified opinion which
is not supported with full compliance by
the auditee with generally accepted
accounting principles in the Philippines
(GAAP). Such negligence shall be
determined by the BSP after proper
investigation during which the external
auditor shall be given due notice and
hearing;
h. Conduct of any of the non-audit
services enumerated under Item "E.1" for
his statutory audit clients, if he has not
undertaken the safeguards to reduce the
threat to his independence; and
i. Failure to comply with the
Philippine Auditing Standards and
Philippine Auditing Practice Statements.
2. An auditing firms; accreditation
shall be suspended or delisted, after due
notice and hearing, for the following
grounds:
a. Failure to submit the report under
Item "H" or the required reports under Sec.
X190.1.
b. Continuous conduct of audit
despite loss of independence of the firm as
provided under this regulation and under
the Code of Professional Ethics;
c. Any willful misrepresentation in the
following information/ documents;
(1) Application and renewal for
accreditation;
(2) Report required under Item "H";
and
(3) Notarized certification of the
managing partner of the firm.
d. Dissolution of the auditing firm/
partnership, as evidenced by an Affidavit
of Dissolution submitted to the BOA, or
upon findings by the BSP that the firm/
partnership is dissolved. The accreditation
of such firm/partnership shall however be
reinstated by the BSP upon showing that the
said dissolution was solely for the purpose
of admitting new partner/s have complied
with the requirements of this regulation and
thereafter shall be reorganized and reregistered;
e. There is a showing that the
accreditation of the following number or
percentage of external auditors, whichever
is lesser, have been suspended or delisted
for whatever reason, by the BSP:
(1) at least ten (10) signing partners and
currently employed selected/accredited
external auditors, taken together; or
(2) such number of external auditors
constituting fifty percent (50%) or more of
the total number of the firm’s signing partners
and currently selected/accredited auditors,
taken together.
f. The firm or any one (1) of its
auditors has been involved in a major
accounting/auditing scam or scandal. The
suspension or delisting of the said firm
shall depend on the gravity of the offense
or the impact of said scam or scandal on
the investing public or the securities
market, as may be determined by the BSP;
g. The firm has failed reasonably to
supervise an associated person and
employed auditor, relating to the
following:
(1) auditing or quality control
standards, or otherwise, with a view to
preventing violations of this regulations;
(2) provisions under SRC relating to
preparation and issuance of audit reports
and the obligations and liabilities of
accountants with respect thereto;
(3) the rules of the BSP under this
Appendix; or
(4) professional standards.
h. Refusal for no valid reason, upon
order of the BSP, to submit requested
documents in connection with an ongoing
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APP. S-8
09.12.31
investigation. The firm should however be
made aware of such investigation.
3. Pursuant to paragraph 8 of the
aforesaid MOA, the SEC, BSP and IC shall
inform BOA of any violation by an
accredited/selected external auditor which
may affect his/her accreditation status as a
public practitioner. The imposition of
sanction by BOA on an erring practitioner
shall be without prejudice to the appropriate
penalty that the SEC, IC or BSP may assess
or impose on such external auditor pursuant
to their respective rules and regulations. In
case of revocation of accreditation of a
public practitioner by BOA, the
accreditation by SEC, BSP and IC shall
likewise be automatically revoked/
derecognized.
The SEC, BSP and IC shall inform each
other of any violation committed by an
external auditor who is accredited/selected
by any one (1) or all of them. Each agency
shall undertake to respond on any referral
or endorsement by another agency within
ten (10) working days from receipt thereof.
4. Procedure and Effects of Delisting/
Suspension.
a. An external auditor/auditing firm
shall only be delisted upon prior notice
to him/it and after giving him/it the
opportunity to be heard and defend
himself/itself by presenting witnesses/
evidence in his favor. Delisted external
auditor and/or auditing firm may re-apply
for BSP selection after the period
prescribed by the Monetary Board.
b. BSP shall keep a record of its
proceeding/investigation.
Said
proceedings/investigation shall not be
public, unless otherwise ordered by the
Monetary Board for good cause shown,
with the consent of the parties to such
proceedings.
c. A determination of the Monetary
Board to impose a suspension or delisting
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Appendix S-8 - Page 10
under this section shall be supported by a
clear statement setting forth the following:
(1) Each act or practice in which the
selected/accredited external auditor or
auditing firm, or associated entry, if
applicable, has engaged or omitted to
engage, or that forms a basis for all or part
of such suspension/delisting;
(2) The specific provision/s of this
regulation, the related SEC rules or
professional standards which the Monetary
Board determined as has been violated; and
(3) The imposed suspension or
delisting, including a justification for either
sanction and the period and other
requirements specially required within
which the delisted auditing firm or external
auditor may apply for re-accreditation.
d. The suspension/delisting, including
the sanctions/penalties provided in Sec.
X189 shall only apply to:
(1) Intentional or knowing conduct,
including reckless conduct, that results in
violation or applicable statutory, regulatory
or professional standards; or
(2) Repeated instances of negligent
conduct, each resulting in a violation of the
applicable statutory, regulatory or
professional standards.
e. No associate person or employed
auditor of a selected/accredited auditing
firm shall be deemed to have failed
reasonably to supervise any other person
for purpose of Item "I.2.g" above, if:
(1) There have been established in and
for that firm procedures, and a system for
applying such procedures, that comply with
applicable rules of BSP and that would
reasonably be expected to prevent and
detect any such violation by such associated
person; and
(2) Such person or auditor has
reasonably discharged the duties and
obligations incumbent upon that person by
reason of such procedures and system, and
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APP. S-8
09.12.31
had no reasonable cause to believe that such
procedures and system were not being
complied with.
f. The BSP shall discipline any
selected external auditor that is suspended
or delisted from being associated with any
selected auditing firm, or for any selected
auditing firm that knew, or in the exercise
or reasonable care should have known,
of the suspension or delisting of any
selected external auditor, to permit such
association, without the consent of the
Monetary Board.
g. The BSP shall discipline any
covered institution that knew or in the
exercise of reasonable care should have
known, of the suspension or delisting of its
external auditor or auditing firm, without
the consent of the Monetary Board.
h. The BSP shall establish for
appropriate cases an expedited procedure
for consideration and determination of the
question of the duration of stay of any
such disciplinary action pending review
of any disciplinary action of the BSP under
this Section.
J.
SPECIFIC REVIEW
When warranted by supervisory
concern, the Monetary Board may, at the
expense of the covered institution require
the external auditor and/or auditing firm
to undertake a specific review of a
particular aspect of the operations of these
institutions. The report shall be submitted
to the BSP and the audited institution
simultaneously, within thirty (30)
calendar days after the conclusion of said
review.
K. AUDIT BY THE BOARD OF
DIRECTORS
Pursuant to Section 58 of RA. No. 8791,
otherwise known as “The General Banking
Law of 2000” the Monetary Board may also
direct the board of directors of a covered
institution or the individual members thereof,
to conduct, either personally or by a
committee created by the board, an annual
balance sheet audit of the covered
institution to review the internal audit and
the internal control system of the
concerned entity and to submit a report
of such audit to the Monetary Board
within thirty (30) calendar days after the
conclusion thereof.
L. AUDIT ENGAGEMENT
Covered institutions shall submit the
audit engagement contract between them,
their subsidiaries and affiliates and the
external auditor/auditing firm to the
appropriate department of the SES within
fifteen (15) calendar days from signing
thereof. Said contract shall include the
following provisions:
1. That the covered institution shall be
responsible for keeping the auditor fully
informed of existing and subsequent changes
to prudential regulatory and statutory
requirements of the BSP and that both
parties shall comply with said requirements;
2. That disclosure of information by the
external auditor/auditing firm to the BSP as
required under Items “H” and “J” hereof, shall
be allowed; and
3. That both parties shall comply with
all the requirements under this Appendix.
(As amended by Circular No. 660 dated 25 August 2009)
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-8 - Page 11
APP. S-9
13.12.31
GUIDELINES IN CLASSIFYING LOANS AND OTHER RISK ASSETS AND
SETTING UP OF ALLOWANCE FOR PROBABLE LOSSES
(Appendix to Sections 4308S and 4392S)
NSSLAs are responsible for the regular
review and assessment of the quality of their
loan portfolio and other risk assets. It is the
duty of the board and senior management
of NSSLAs to ensure that the good quality
of these assets is maintained, and that
adequate loss reserves are set-up at all times.
To achieve these objectives, NSSLAs shall
adopt and fully document policies and
procedures for an effective internal asset
review system and monitoring processes
which should, at a minimum, comply with
the standards prescribed herein. These
policies and procedures should be clearly
communicated to all relevant parties in the
organization to ensure implementation
thereof. Adequate measures should be
adopted to see to it that asset review policies
and procedures remain relevant and
appropriate with due consideration of the
design and characteristics of their portfolio,
and that enough safeguards to ensure that
changes where appropriate are adopted.
Failure to conduct this regular assessment
and set-up adequate loss reserves shall be
considered unsafe and unsound practice.
I. Classification of loans. Loans shall be
qualitatively assessed and grouped as
unclassified or classified.
A. Unclassified loans. These are loans
that do not have a greater-than-normal credit
risk and do not possess the characteristics
of classified loans as defined. The borrower
has the apparent ability to satisfy his
obligations in full and therefore no loss in
ultimate collection is anticipated.
B. Classified loans. Their classification
and characteristics are detailed as follows:
1. Loans especially mentioned. These
loans have potential weaknesses which, if
left uncorrected, may affect the repayment
of the loan. Their characteristics include:
a. Loans extended to memberborrowers whose paying capacity was not
appropriately determined;
b. Accounts with defects and
deficiencies in documentation which may
render the collection of the loan difficult, e.g.,
loans with unsigned promissory notes; and
c. Accounts which are 1-10 days past
due based on the established and approved
collection cycle indicated in the product
manual of an NSSLA.
2. Substandard. These loans have welldefined weakness or weaknesses that
jeopardize their repayment/liquidation,
including adverse trends or developments
that affect willingness or capacity to pay.
Basic characteristics include the following:
a. For secured loans:
(1) There is an imminent possibility of
foreclosure or acquisition of the collateral
because failure of all collection efforts.
b. For unsecured loans:
(1) Loans under litigation; and
(2) Loans classified as “Loans Especially
Mentioned” in the last examination the
weaknesses of which remained uncorrected
in the current examination.
In addition, loans which are 11-30 days
past due based on the established and
approved collection cycle indicated in the
product manual of an NSSLA.
3. Doubtful. These are loans whose
characteristics make collection or
liquidation highly improbable and from
which substantial loss is probable, such as:
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S Regulations
Appendix S-9 - Page 1
APP. S-9
13.12.31
a. Past due loans secured by real estate
mortgage, the title to which is subject to
adverse claim or with defect in ownership
rendering settlement of the loan through
foreclosure doubtful;
b. Past due loans secured by collaterals
which have declined in value materially
without the borrower offering additional
collateral for the loans; and
c. Loans which are 31-90 days past due
based on the established and approved
collection cycle indicated in the product
manual of an NSSLA.
4. Loss. These are loans considered
uncollectible. Their basic characteristics
include the following:
a.
The
member-borrower’s
whereabouts is unknown, or he has
absconded, is dead or his earning power is
permanently impaired and his co-makers or
guarantors are insolvent or that their
guaranty is not financially supported:
Provided, That the NSSLA may take into
account the outstanding balance of deposits
and/or capital contributions of the memberborrower and/or the present realizable value
of security offered;
b. Where the collaterals securing the
loans are without recoverable values and
the member-borrower and his co-makers are
insolvent; and
c. Loans which are past due for ninetyone (91) days and beyond based on the
established and approved collection cycle
indicated in the product manual of an
NSSLA.
C. Restructured loans. Upon execution
of the restructuring agreement, the
classification of a loan prior to restructuring,
either “loans especially mentioned”, or
“substandard” or “doubtful” shall be
retained. The upgrading of the loan’s
classification shall only be effective after a
satisfactory track record of three (3)
consecutive payments of the required
S Regulations
Appendix S-9 - Page 2
amortization of principal and/or interest has
been established and if such loan meets the
criteria of the lower loan classification.
II. Classification of Other Risk Assets
A. Real and Other Properties Acquired
(ROPA), Sales Contract Receivable (SCR)
and Investments shall be subject to
impairment provisions under the Philippine
Accounting Standards (PAS) which were
adopted by the Bangko Sentral. ROPA
exceeding P5.0 million book value shall be
appraised by external appraisers acceptable
to the Bangko Sentral. An in-house appraisal
of all ROPAs shall be made every other year:
Provided, That immediate re-appraisal shall
be conducted on ROPAs which materially
decline in value.
While ROPA and SCR are subject to
impairment provisions, their classifications
status shall be “Substandard”. ROPAs are
not sound assets because their nature as
non-liquid and non-productive. As such their
immediate disposal is highly recommended.
On the other hand, SCRs come from
conversion of ROPA, hence, they shall
initially carry the classification of their
predecessor. SCRs which meet all the
requirements/conditions enumerated below
are considered performing assets and not
subject to classification:
1. That there has been a down
payment or installment payments on the
principal of at least twenty percent (20%)
of the agreed selling price.
2. That payment of the principal must
be in equal installments or in diminishing
amounts and with maximum intervals of
one (1) year.
3. That any grace period in the
payment of principal shall not be more than
one (1) year; and
4. That there is no installment payment
in arrear either on principal or interest:
Manual of Regulations for Non-Bank Financial Institutions
APP. S-9
13.12.31
Provided, That an SCR account shall be
automatically classified “substandard” and
considered non-performing in case of
non-payment of any amortization due:
Provided further, That an SCR which has
been classified “substandard” may only be
upgraded to unclassified/performing status
after a satisfactory track record of at least
three (3) consecutive payments of the
required amortization of principal and/or
interest has been established.
The Bangko Sentral however, reserves
the right to require that specific provisions
on ROPA and SCR be made, if based on its
assessment, the NSSLA is unable to make
necessary impairment provisioning.
B. Accounts receivables shall be
classified in accordance with age as follows,
unless there is good reason for nonclassification:
No. of Days Outstanding
61-180
181-360
Beyond 361
Classification
Substandard
Doubtful
Loss
The classification according to age of
accounts receivable shall be used in
classifying other risk assets not covered
above. However, their classification should
be tempered by favorable information
gathered in the review.
III. Allowance for Probable Losses. The
allowance for losses for classified loans and
other risk assets shall be set up immediately
in accordance with the following
guidelines:
A. Specific allowance. Specific
minimum allowance shall be immediately
set-up based on the qualitative review of
loans and accounts receivable, as follows:
Classification
Unclassified
Loans Especially
Mentioned (LEM)
Substandard
Doubtful
Loss
Minimum Specific
Allowance (Percent)
Loans
Accounts
Clean
Fully Receivables
Secured
0
0
0
10
25
50
100
5
12.5
25
50
N/A
25
50
100
Provided, That prudent level of
provisioning should be increased beyond
the minimum prescribed depending on the
estimated realizable net present value of the
collateral less transaction costs of realizing
its value: Provided further, That for purposes
of comprehensive estimating the minimum
required level of provisioning for the loan
portfolio, the Bangko Sentral reserves the
right to rely on valid sampling techniques
and to group loans with similar
characteristics.
B. General allowance. In addition to the
specific allowance for probable losses under
Item “1”, a general provision for loan losses
shall also be set-up as follows:
(a) Two percent (2%) of the outstanding
balance of unclassified restructured loans;
and
(b) One percent (1%) of the outstanding
balance of unclassified loans.
3. In addition to the foregoing minimum
prudential requirements, NSSLAs are also
required to comply with the provisions of
the Philippine Accounting Standards (PAS)
on the recognition of impairment losses on
its financial assets: Provided, That NSSLAs
are required to meet the Bangko Sentral
minimum allowance for losses or the
required provisioning under the PAS,
whichever is higher.
(Circular No. 789 dated 28 February 2013)
Manual of Regulations for Non-Bank Financial Institutions
S Regulations
Appendix S-9 - Page 3
APP. S-10
14.12.31
GUIDELINES AND PROCEDURES GOVERNING THE
CONSUMER ASSISTANCE MANAGEMENT SYSTEM (CAMS)
OF BSP-SUPERVISED FINANCIAL INSTITUTIONS
[Appendix to Subsec. 4402S.4]
I. Statement of Policy
The Bangko Sentral acknowledges the
indispensable role of financial consumers
in bringing about a strong and stable
financial system, their right to be protected
in all stages of their transactions with
Bangko Sentral- Supervised Financial
Institutions (BSFIs), and be given an avenue
to air out their grievances in the products
and services of BSFIs. Consumer protection
is regarded as a core function
complementary to Bangko Sentral's
prudential regulation and supervision,
financial stability, financial inclusion, and
financial education agenda. Towards this
end, the Bangko Sentral hereby issues the
following
minimum
guidelines
institutionalizing consumer assistance
mechanism of BSFIs.
II. Applicability and Scope
The CAMS requirements and minimum
guidelines on receiving, recording,
evaluating, resolving, monitoring, reporting,
and giving feedback to consumers shall
apply to a BSFI and its branches/other offices.
The provisions of these guidelines shall, as
far as practicable, also apply to inquiries and
requests received from clients and potential
clients.
III. Definition of Terms
a. Complaint- is an expression of
dissatisfaction relative to a financial product
or service in which a response or resolution
is expected.
b. Simple complaint/request- complaint/
request where frontline staff solution or
immediate explanation or action can be
rendered. A resolution is immediate if it can
be resolved without the need of third-party
intervention, such as outsource service
providers, external auditors, or other banks.
Resolution thereof must be achieved within
a 7-day period.
c. Complex complaint/requestcomplaint/request which needs assessment,
verification, or investigation with third-party
intervention. Resolution thereof may ideally
be achieved within a 45-day period.
d. BSFIs- include banks, quasi-banks,
pawnshops, foreign exchange dealers,
money changers, remittance agents,
electronic money issuers, non-stock savings
and loan associations and other Bangko
Sentral-Supervised Financial Institutions.
e. Consumer- refers to a natural or
juridical person who has a complaint,
inquiry or request relative to the BSFI's
products and services.
IV. Role of the Board and Senior
Management
The board of BSFIs shall be responsible
for the delivery of effective recourse to its
consumers. Pursuant thereto, the board shall:
a. Approve the consumer assistance
policies and procedures;
b. Approve risk assessment strategies
relating to effective recourse by the consumer;
c. Ensure compliance with consumer
assistance policies and procedures;
d. Provide adequate resources devoted
to consumer assistance; and
e. Review the consumer assistance
policies at least annually.
The BSFI's senior management shall be
responsible for the implementation of the
consumer assistance policies and
procedures.
Manual of Regulations for Non-Bank Financial Institutions
Appendix S-10 - Page 1
APP. S-10
14.12.31
V. Minimum Requirements
A. Manual of Consumer Assistance Policies
and Procedures
A BSFI must have a manual of policies and
procedures (Manual) in handling consumer
complaints, inquiries, and requests from
financial consumers. The Manual, as a
minimum, provide for the following:
(1) Corporate structure of the group on
consumer assistance with specified roles and
responsibilities/tasks;
(2) Capability building for customer
assistance team;
(3) Consumer assistance process and
timeline;
(4) Complaint recording/data management
system;
(5) Risk assessment strategies;
(6) Reporting of complaints data to BSFI's
board and senior management and Bangko
Sentral;
(7) System for evaluating effectiveness of
the CAMS; and
(8) Glossary of technical components in
the Manual.
B. Corporate Structure
A BSFI shall have a consumer assistance
officer/independent business unit or group
with defined roles and responsibilities in
handling consumer concerns. The corporate
structure shall depend on the BSFI's asset size,
as follows:
Consumer Assistance
Group
Dedicated Head
Consumer
Assisstance
Officer
Head Consumer
Assistance Officer
BSFIs with total assets
of at least P1.0 billion
BSFIs with total assets of
less than P1.0 billion but
more than 100 million
BSFIs with total assets of
less than 100 million
At least one (1) consumer assistance officer
per branch, extension office or banking office
must be designated to handle consumer
concerns.
Appendix S-10 - Page 2
(1) Consumer assistance officer. The
consumer assistance officer shall have the
following responsibilities:
(a) Receive and acknowledge consumer
concerns;
(b) Record concerns in a Register/
Database;
(c) Make an initial review and
investigation of concerns;
(d) Process concerns;
(e) Provide official reply to consumer;
(f) Request client feedback; and
(g) Prepare and submit report to the
head consumer assistance officer or
consumer assistance group.
(2) Consumer assistance group/head
consumer assistance officer. The consumer
assistance group/head consumer assistance
officer shall, as a minimum, perform the
following:
(a) Monitor consumer assistance process;
(b) Keep track, identify, and analyze the
nature of complaints and recommend
solutions to avoid recurrence;
(c) Report to senior management the
complaints received on a monthly basis
including reasons for such complaints, the
recommended solutions to avoid
recurrence, and the suggestions for process
or personnel competency needing
improvement; and
(d) Ensure immediate escalation of any
significant complaint to concerned unit of
the BSFI.
C. Capacity building
All consumer assistance personnel must
be equipped with knowledge on the
structure and implementation of the BSFI's
consumer assistance mechanism. As a
minimum, they shall be provided with
periodic trainings on the following:
(1) Solid interpersonal skills/customer
service;
(2) Basic and advanced listening skills;
Manual of Regulations for Non-Bank Financial Institutions
APP. S-10
14.12.31
(3) Written and verbal communication
skills;
(4) Handling financial consumer
feedback;
(5) Dealing with difficult people;
(6) Problem solving and conflict
resolution; and
(7) BSFI's corporate structure and
products and services.
D. Publication of Consumer Assistance
Management System
(1) BSFI's shall publish details of their
CAMS in a clear and plain language.
(2) Publication shall be made through
any two of the following means:
(a) Posting of summary details of the
CAMS in conspicuous places within the
premises of BSFIs and their branches/other
offices;
(b) A leaflet or primer given to all
consumers who sign up for new banking
service.
(c) Terms and Conditions of a BSFI's
product or service;
(d) Posting in the BSFI's website; and
(e) Any analogous manner.
E. Consumer Assistance Channels
(1) Consumers may lodge their concerns
through any reasonable means, such as, a
centralized web-portal, walk-in or personal
visit, letter, e-mail, telephone, and facsimile.
(2) A BSFI must maintain a consumer
assistance helpdesk or hotline dedicated for
customer concerns and service and manned
by a consumer assistance group.
(3) A BSFI shall ensure that consumers
know how and where to lodge their
concerns.
(4) A BSFI is encouraged to provide
alternative modes of resolution, such as
conciliation, mediation and arbitration, in
order to achieve settlement of the issues at
the BSFI level.
1
F. Consumer Assistance Process and
Timelines
(1) Complaint/Request
SIMPLE1
COMPLEX1
Acknowledgment Within 2 days Within 2 days
Processing and Within 7 days Within 45 days
resolution
(assess,
investigate,
and resolve)
Communication Within 9 days Within 47 days
of Resolution
(a) Receiving and acknowledging
complaints/requests
(i) A BSFI shall obtain and record the
following data from the consumer: (1) full
name and contact details, (2) nature of
complaint or request and its details; (3)
resolution requested; (4) signature of the
complainant/requester; and (5) name of BSFI
personnel directly handling/in-charge of the
complaint.
(ii) The consumer assistance officer must
be able to explain the consumer assistance
process and timelines.
(iii) The acknowledgment shall provide
an assurance that the BSFI is dealing with
the complaint, request additional
documents, if necessary, and that the
complainant shall be kept informed of the
progress of the measures being taken for the
complaint’s resolution
(b) Investigating and resolving
complaints
(i) A BSFI must establish an institutional
approach in assessing and investigating
complaints/requests and options in resolving
them, considering the peculiarities of the
complaints/requests and the desired
remedies of the party.
(ii) If assessment and investigation on
complex complaints/requests cannot be
completed within the timeframe stated
above, complainants shall be informed of
all periods are reckoned from receipt of complaint.
Manual of Regulations for Non-Bank Financial Institutions
Appendix S-10 - Page 3
APP. S-10
14.12.31
the: (aa) reason thereof; (bb) need for
extended timeframe; and (cc) date on which
the complainant may expect the outcome
of the BSFI assessment and/or investigation;
Provided, however, that the additional
period shall not exceed forty-five (45) days.
This will afford the complainants
opportunity to seek other means to resolve
their complaints.
(iii) Result of assessment, investigation,
and BSFI’s final response shall be
communicated to the complainant in
writing in simple and clear language. The
BSFI shall likewise inform the complainant of
the possible remedies available to the party,
including resort to Bangko Sentral consumer
assistance mechanism and the courts.
(2) Inquiries
A BFSI must respond to inquiries received,
at the latest, by the next business day.
G. Confidentiality
A BSFI shall not disclose to a third party
information acquired from the consumer in
all stages of the complaint, except as may
be required by the conduct of the BSFI’s
investigation.
H. Conflict of interest
A BSFI shall ensure that complaints are
investigated by a consumer assistance
officer who is neither directly nor indirectly
involved in the matter which is the subject
of the complaint.
I. Consumer Feedback
(1) Subject to the willingness of the
consumer, BSFIs shall ask for feedback
on the following matters:
(a) Overall satisfaction (whether
satisfied, somewhat satisfied, or
dissatisfied);
(b) Processes needing improvement;
(c) Personnel needing improvement;
and
(d) Any suggestions for improvement.
(2) Consumer feedback may be
obtained through a feedback form/
customer satisfaction survey available for
walk-in complainants, in the website, or
through a voice logger system.
(3) Customer feedbacks shall be
recorded and analyzed to improve the
system and to enhance personnel
capabilities in handling complaints.
J. Complaints Recording/Data Management
(1) A BSFI and its branches/other
offices shall maintain copies of the
complaints/requests received, including
supporting and other relevant documents
thereto, within a period of two (2) years
from date of resolution.
Microfilms/digital copies of original
documents may be maintained by a BSFI
in accordance with its management
information systems for record keeping.
(2) A BSFI and its branches/other
offices shall maintain complaints/requests
register which contains the following
information:
(a) Name of the complainant;
(b) Subject/nature of the complaint;
The subject/nature of complain may
be indicated by classification, such as
those related to credit cards, deposits,
administrative, foreign exchange,
remittances, investments, others;
(c) Name of the personnel directly
handling/in-charge of the complaint and
officer supervising the resolution of the
complaint;
(d) Date of receipt of complaint by the
BSFI;
(e) Actions taken on the complaint or
request;
(f) Resolution provided;
(g) Date of resolution 1; and
(h) Other information such as, log and
details of phone calls made or received.
(3) The Consumer assistance group/head
consumer assistance officer shall maintain:
1
The complaint register must reveal the reason in case the date of resolution falls outside the regulatory
deadline.
Appendix S-10 - Page 4
Manual of Regulations for Non-Bank Financial Institutions
APP. S-10
14.12.31
(a) A master register of all complaints
received by the BSFIs and its branches/
other offices; and
(b) A complaint database to identify
the trend of complaints received, potential
problems, and risks.
K. Risk Assessment Strategies
Pursuant to the BSFI’s consumer protection
risk management system, the BSFI shall put
in place appropriate management controls
and take reasonable steps to ensure that in
handling complaints/requests, it: (1) identifies
and remedies any recurring or systemic
problems; and (2) identifies weaknesses in
the BSFI’s internal control procedure or
process. This may be done by:
(a) Analyzing complaints/requests data;
(b) Analyzing causes for complaints/
requests;
(c) Considering whether such identified
weaknesses may also affect other processes
or products, including those not directly
complained of/requested; and
(d) Correcting, whether reasonable to
do so, such causes taking into consideration
the concomitant costs and other resources.
L. Complaint Reporting
(1) Internal Reporting
(a) The consumer assistance officers in
the branches, extensions office and other
offices of the BSFI shall submit a complaints
report to the consumer assistance group /
head consumer assistance officer on a
monthly basis.
(b) Complaints report shall be submitted
on a monthly basis by the consumer
assistance group/head consumer
assistance officer to the board and senior
management.
(c) The report shall include, as a
minimum:
(i) General category of complaints
received;
(ii) Statistics/frequency of said
complaints;
(iii) Aging of complaints or requests;
(iv) Explanations on deviations, if any,
from required resolution period; and
(v) General description of resolutions
and actions taken to resolve complaints/
requests;
(d) The report shall include
recommendation on how to avoid recurring
complaints and suggestions for process/
personnel competency improvement, as
needed.
(e) The report of the BSFI’s compliance
and internal audit departments concerning
the independent review conducted on the
complaints report, policy recommendations,
and consumer protection compliance, shall
be elevated to Board every quarter.
(f) The BSFI shall include complaints/
requests statistics in its Annual Report.
(2) Reporting to the Bangko Sentral
A BSFI shall submit a consolidated
Complaints Report to the Supervisory Data
Center (SDC) of the Supervision and
Examination Sector on a quarterly basis.
Such report shall be submitted in the format
required by Bangko Sentral. Submission of
the report to the SDC shall not be later than
one (1) month after the end of every quarter.
A Complaints Report is a Category B Report
for purposes of applying the appropriate
monetary penalty.
M. Interface with Bangko Sentral
(1) Pursuant to Bangko Sentral’s
Consumer Protection Framework, a BSFI
shall exhaust all internal remedies
available to address the issues raised by the
consumers in their complaints/requests.
(2) Consumers dissatisfied with BSFI’s
response or action may seek assistance with
BSP-FCPD (previously FCAG) in accordance
with Bangko Sentral Consumer Assistance
Mechanism.
(3) Allegations of consumers that the
BSFI has not properly and efficiently
handled, processed, and responded to their
concerns shall be validated, and where
Manual of Regulations for Non-Bank Financial Institutions
Appendix S-10 - Page 5
APP. S-10
14.12.31
appropriate, considered in FCPD’s
(previously FCAG) assessment of the BSFI’s
compliance with Bangko Sentral Consumer
Protection regulations. This is without
prejudice to the imposition of appropriate
enforcement actions. It is presumed that the
higher number of complaints received by
the Bangko Sentral reflects the noneffectiveness of the BSFI’s CAMS.
N. Outsourcing of Handling Consumer
Concerns
In outsourcing handling of consumer
concerns, a BSFI shall:
(1) Conduct due diligence in the
selection of the outsourced entity/person;
(2) Be responsible for the performance
thereof in the same manner and to the same
extent as if performed by itself;
(3) Comply with all laws and
regulations governing the consumer
assistance activities/services performed by
the outsource entity/person in its behalf;
and
(4) Manage, monitor, and review on an
ongoing basis the performance by the
Appendix S-10 - Page 6
outsource entity/person of the outsourced
consumer assistance activities/services.
O. Accountability and Rewards
In order to ensure fair treatment and
responsible business conduct of personnel
engaged in consumer relations, a
performance appraisal system which
considers the performance of the personnel
assigned to manage/handle complaints shall
be put in place. The performance appraisal
of the personnel shall be linked to their
efficiency in handling consumer complaints.
This could be done through rewards/
remuneration for excellent behavior.
P. Consumer Assistance to Persons with
Disabilities (PWDs) and non-English
Speakers
As far as practicable, a BSFI shall take
into account the needs of PWDs, such as,
but not limited to those with learning
difficulties, people who are deaf or hard of
hearing, the visually impaired, and the nonEnglish speakers, in ensuring that they
understand the CAMS.
(Circular No. 857 dated 21 November 2014)
Manual of Regulations for Non-Bank Financial Institutions